Is inflation already at 15-30 percent if we hold delivery time constant?

The government assures us that the U.S. inflation rate is 3 percent. Part of the magic of this statistic is that the actual cost of buying a house was removed from the basket of stuff that an American might purchase. So if houses have zoomed up by 50 percent that has no effect on the headline inflation number. The government postulates a hypothetical world in which every American is a renter, despite the fact that renting in the U.S. is not a substitute for owning a house (e.g., if you want a single family home with windows on all four sides you’re probably not renting from a big commercial landlord and therefore you’re always at risk of being kicked out if the owner wants to use the house, sell the house, etc.).

I wonder if another way to defraud the public is to look at prices without looking at delivery time. A new Cirrus SR20, for example, can be purchased for $500,000. That’s an inflation rate of 3.7 percent per year from 2005 when the airplane was $280,000. But the delivery time used to be at most 2-3 months after placing an order. Today it is 15 months. If you wanted to buy out someone else’s order and get a Cirrus within 2-3 months you’d likely have to pay $600,000.

Have the Apple AirPods and want to complete the Total Douchebag Package with a Tesla 3? Your luxury dog kennel is 8-12 weeks away, up from 0-3 weeks. Yes, the price is somewhat higher, but a market-clearing price for a Tesla to be delivered in 0-3 weeks would be substantially more.

Want to waste money on the water instead of on land or in the air? Line up! “New boats the latest item hit by a shortage during the COVID-19 pandemic”: Chad Chaney drove from Forney to Lewisville with his daughter just to check out a new boat similar to one he ordered back in January and still won’t get for a few more months. (Friends who own older boats say that the values for used boats are up 30 percent compared to two years ago.)

Since we’re stuck at home with no car, no boat, and no airplane, maybe we can play games on a new PC with an awesome graphics card. If we order an Alienware R12 today it will show up “with express delivery” on August 6 (a two-month wait for a device that is supposed to get better and cheaper every couple of months):

If we can’t play games on the computer for two months, maybe we can play games on a tennis court. The local tennis shop says that most balls are on back-order until August. The owner predicted immediate defeat for the U.S. if we ever were to go to war with the Chinese.

As part of our escape from Maskachusetts to the Florida Free State, a contractor is fixing up our already-sold house (condition of the P&S that we do the work we would have done if we had put the house on the market). Most of his materials estimates are turning out to be inaccurate if he wants to see the part, e.g., a picture window, this summer. We are paying 50 percent more for windows and other components, and, of course, 3X for lumber. (see “Sticker shock: Lumber prices up by more than 350 percent”) His costs for unskilled labor are 40 percent higher. Where he previously paid $18 per hour he is now paying $25 per hour to compete with Joe Biden and Charlie Baker. That’s if he can find someone. “Everyone who is worth hiring already has a job,” he says, “and the only people left refuse to work W-2 because they don’t want to lose their benefits. I’m too big to pay cash.” He says that he understands why $25 is the new minimum: “Nobody can live on $18 per hour anymore.” (The Massachusetts and U.S. governments agree; a family of 4 has to earn more than $100,000 per year to become ineligible for health insurance subsidies and over $130,000 to become ineligible for subsidized housing in our suburb.)

For the move itself, we found that the storage container-based moving companies had 2-4-week wait times for a container to be delivered.

Why don’t retailers just raise prices to market-clearing levels? My guess is that there is an expectation that shortages will ease and the market-clearing price will fall. Retailers don’t want consumers to remember them for “price-gouging”.

Readers: What items have you tried to buy lately and found that there were long lead times?

17 thoughts on “Is inflation already at 15-30 percent if we hold delivery time constant?

  1. Top bicycles are ridiculously expensive and Shimano components have a long waiting list.

    This one happens to be available (with SRAM components):

    Compare the price to motor cycles:

    I think for a decent bicycle that does not break down constantly one has to spend $3000 at least.
    20 years ago it may have been $800.

  2. 3% inflation percent is clearly a bogus number from consumer point of view. Something that everyone is dependent on – commute -prices went well up, and in several cases state governments are first who charge road tolls 3x of what they used to be. Car part that I am buying is priced up close to 100% from several years ago. Fuel prices are up at least 20% and they propagate through consumer economics. I guess mobile electric generators and flat screen TVs are at the same level or priced down but including them in consumer inflation with the same weight as fuel is misleading at best.

    • GPU scarcity is entirely due to the growth of digital currency mining and the corresponding increase in demand for the chips that do the mining most efficiently. A top-end GPU can recoup the list price from digital currency mining in two months.

  3. Pure anecdote (I guess that’s what you are asking for) but I have been having routine Amazon orders suddenly canceled on me, and I’ve heard that similar cancellations are happening to others. I doubt Amazon will release data on this, but it suggests either a just-in-time logistics breakdown, or a least-bad solution to the problem of inflation hitting so fast that they would lose money on an order. (The alternative solution: Raising the price of an in-process order.)

    That latter is the thing to watch for. In the Weimer days, you’d get your “paper marks” and purchase whatever you could as fast as possible. Anything a store had, you’d purchase. If you bought a dinner, it might change price while you were eating.

  4. The property tax on my FL rental unit has increased 10% per year on average over the past 5 years.

    My employer-sponsored health insurance is forecast to increase from $0 to $100 per month for me, the employee; so is that basically 1000%?

    The base Medicare Part B premium is up 9.6% since 2019.

    For the past six months, I’ve been diligently looking for a decent used boat and I can confirm that used boat prices are up well over 30%. Twenty-year old boats are listing at close to what they sold at as new, and selling w/i 24 hours.

  5. I’m at the top step of my pay grade, so inflation won’t get me any additional salary. I am waiting, however, for inflation to bump up the CD rates.

  6. Furniture. Our neighbors just sold their house and relocated 30 miles down the coast to Huntington Beach. They sold, or gave away, their old stuff and ordered new….it’s not being delivered until December.

  7. I sold my boat on Facebook Marketplace, the new Craigslist. It took 4 hours and after that I had two offers 20 percent over the ask. Built it myself when I retired 20 yrs ago. Basically sold the engine and threw in the boat/trailer.

    My ad in a niche boatbuilder magazine attracted two phone calls and no offers in two months. Zuck may be an asshole but his business is ticking along like a Singer set on “buttonhole”.

    • LED drivers ($1.50 now $8.30 from shady broker)
      TVS diode (can’t get til next year, qualifying alternate part)
      Assorted bypass caps.
      Custom stainless parts for medical device (needles, crimp tubes)
      Assembly operators (disincentivized to work.)
      The global supply chain is broken, and we are paying dearly just to keep a small medical device company in business.

  8. Any electronic component is unobtanium now. Funny how the government & the media insist the price increases are from the pandemic, even though they only happened after the last $2 trillion of quantitative easing. They’re trying to manetain the illusion that they’re only transient, even though we were all around for the transient price increases in 2003.

  9. “Global supply chain”, lol. Long time ago probably during late Clinton or early Bush times I thought about switching gears onto something more analytical but still practical and checked out Operations Research Society website searching for advise. Back then website consisted of list of outsourcing contacts and that was it! At least now they have a woke website. Now that we have China – dependent government and Taiwan is becoming non-entity and millennials and post-millennials upbringing left them unprepared for real work we as well may pray for electronic components together with praying for rain.

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