How’s transitory inflation in your area?

by philg

From the in-house economics Nobel-winner at the New York Times (December 2021):

Even once the inflation numbers shot up, many economists — myself included — argued that the surge was likely to prove transitory. But at the very least it’s now clear that “transitory” inflation will last longer than most of us on that team expected.

In other words, all inflation is transitory, but some transitory inflation is more transitory than others.

(Dr. Jill Biden’s colleague Professor Dr. Krugman, M.D., Ph.D. previously successfully predicted the stock market crash that lasted throughout the dark Donald Trump years.)

Readers: What are you seeing for the stuff that you buy? If you’re in business, what are customers saying when you raise prices to them? Is it better to multiply by 1.4X once or 1.1X every few months until your revenue recovers its former purchasing power?

We took our Odyssey in for an oil change. The Honda dealer’s showroom contained only used cars, as did the lot. A new Accord or Odyssey was available for $3000 over sticker and a 1-2-month wait. “Some dealers are charging more,” the salesman said. This would be about $7,000 more than we paid for our in-stock Odyssey a year ago (i.e., roughly comparable to the 20% annual inflation in housing, though it would have been much higher for similar delivery time (buy out someone else’s order for $5,000 extra?)).

Honda plainly isn’t charging a market-clearing price for wiper blades. The dealer had just one of the two front blades in stock. Regarding the passenger-side blade, the advisor said “They’ve been on backorder.”

Our Cirrus SR20 needs its “reefing line cutters” replaced every 6 years. These are required every time that the pilot, or a nervous passenger, elects to land via parachute. Owners have mentioned long delays in getting parachute components for the Cirrus so I emailed our mechanic recently, three months before we actually need the part. Here was his response:

I will order you a set of line cutters as this has been on back order … be advised aircraft parts are increasing in price almost every day!

In 2021, Robinson Helicopter Company, founded in 1973, imposed its first-ever mid-year price increase. Order your aviation stuff now (13 percent price increase from Lycoming) describes a first-in-many-decades mid-year price increase from Lycoming.

Aviation costs, even for parts, seem to go up more like U.S. labor costs than like the costs of stuff that you can buy in Walmart. Aircraft parts, due to certification requirements, can’t be made by multiple competing Chinese and Mexican factories. The volume is low so it isn’t worth automating. Even if you’re just buying a bolt, which for a jet can cost $thousands, you’re essentially buying labor and health insurance.

Here is a line cutter in action. I think you’re seeing a $1,000 part (there are two for redundancy and both must be replaced every six years; then there is the $15,000 currently-unobtainable re-packed parachute every 10 years):

The used aircraft market is still booming, with airplanes worth 2X what they went for in 2019, but I wonder if a few years of transitory inflation will change that. Not everyone’s income goes up with inflation. Someone who bought a plane budgeting $X/year for hangar, maintenance, and insurance will now be paying $2X per year. At some point, won’t that person begin to ask “Why do I need this airplane? I can do most meetings via Zoom. I can move to Florida and have popular vacation destinations within a short drive. President Harris can’t keep up the mask requirements on commercial airlines forever.”

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21 thoughts on “How’s transitory inflation in your area?”

  1. Property tax inflation on non-homesteaded investment properties is what’s mostly affecting me – up 50% in five years.

    I don’t carry windstorm (hurricane) property insurance, so my property insurance has remained level for the past five years. Though, just yesterday, a coworker complained to me that he just received his property insurance renewal notice and a 57% increase over last year. The property insurer for my father’s beachside FL single-family home non-renewed forcing my dad to the FL insurer of last resort – Citizens, and a 5% increase.

  2. I haven’t called to find out if these prices are real, but Cirrus just published list prices for 2022 planes: https://cirrusaircraft.com/wp-content/uploads/2022/01/2022-SR22-Domestic-PriceSheet-v3.pdf

    The price increases don’t seem unreasonable. Now, maybe your point about the real price increase if you want that plane right now applies, but let’s say delivery on an order placed today really is two years out, why not place the deposit and accept some delay? Heck, why not borrow the money fo the deposit since while the Fed is threatening to increase interest rates it has not done so yet?

  3. Home price to income ratios are climbing fast (like a Cirrus SR20) but those on the coasts averse to paying 12x median family income can always move to fly over country with the proles and the pit bulls and the loud trucks where housing is cheaper. For now anyway. Pit bulls do add value in that they help maintain affordable housing.

  5. Europe: Health insurance up 30%, gas prices up 47%, electricity up 18%:

    https://www.cleanenergywire.org/news/german-consumers-experience-biggest-rise-ever-gas-and-power-prices-2021

    We are shutting down nuclear plants and construct gender neutral toilets. And we censor mean online speech. Let’s add a little mean speech (with apologies to Thatcher):

    “Why, this it is when men are rul’d by women:
    ‘Tis not the king that sends you to the Tower;
    My Lady Gray his wife, Clarence, ’tis she
    That tempers him to this extremity. “

  6. The lion kingdom day job was passing on inflation to customers for the last 2 years but has now begun reducing computing power to absorb costs. Instead of a 4Ghz module, we’re selling a 200Mhz module. Similarly, most companies formerly embedding NVidia GPUs are now using older ARM cores. A camera which tracked a person 4 years ago might only track a face today. Automatically driven robots now have to be manually driven. Bitcoin mining? Fuggedaboutit.

  7. Will cirruses become unflyable soon? Will 1970s cessnas and 1980s mooneys be easier to maintain and become the hot ticket for people that actually want to fly?

  8. I was shopping for motorhome, and they wish to go down for just couple grands if you take one of the very few they have on the lot. Or if you want to order configuration you want it’s +$30K with 6 mounts delivery unguaranteed.

    Moral of the story if you want to camp in RV trailer or motorhome this summer, buy right now.

  9. Our flying club has been in the market for a 172R model. We bought one 2 years ago for 150,000. Today the same plane is worth 250,000. We are replacing a 172N model which 2 years ago was worth 40,000. Today we expect to sell it for about 100k.

  10. Well, we all know that the predictive power of social “scientists” such as Doctor Krugman is about the same as the flip of a coin, i.e., no better than Doctor Jill, so that he has changed his prediction seems about as enlightening as news that an astrologer or necromancer has changed his prediction.

    • Dr. Krugman predictive quality is worse then flip of coin, he seems to be biased, unlike 25 cents.
      He had 2 binary misses in a row, 25% probability for unbiased coin.

  11. Passed several car dealerships while driving around and have been to one for car maintenance before. They look like from The Twilight Zone, I mentioned it in another comment.
    Price of staple groceries keeps climbing, diesel fuel is well over $4 per gallon. This is in a rural area in a state with below average inflation.
    But no mean tweets.

  12. My in-trade wholesale costs for most things I buy has increased by 15-24% over the past year.
    My electricity costs have risen by more than 14%
    My gasoline costs are up between 40-50%
    My food bills are higher but I don’t have the exact numbers.
    My 2010 Ford Escape Hybrid which was worth $8000-8500 last year is now demanding $14,000 from Carvana (with 10k more miles than mine).

    I haven’t checked my local real estate prices.

    The cost of living and working, in other words, has risen dramatically. I have to drive – everywhere. The only thing within 10 miles of me is a convenience store, because I live in the wood (kind of). Just going to town to visit the bank is a 20+ mile round trip. It doesn’t sound like that extra dollar and something a day means anything, but it’s ~$400 a year that I would otherwise have.

    And January has been *frigid*. I have electric heat and have been turning everything off to the greatest extent possible, wearing sweaters and using more blankets. It’s COLD getting into the shower in the morning. Wakes you right up.

    To me, it looks like every nickel we got in “stimulus” money is going to be sucked away – and then some – and those price increases are just going to stick around. End result: I’ve become poorer.

    • The *ONLY* bright spot in 2021 (actually early 2022) was that one of the surviving excellent Subaru dealers in MA, who are very highly ranked and rated on Google, did my parents a real “solid” by fixing my mother’s 2011 Outback. They bought the car from a semi-shady used-car dealer in CT back in late October. Based on the spec. and how clean the car appeared to be, it seemed underpriced by about $1,000.

      I warned my father, but he went ahead, with my mother’s…insistence. 200 miles later it blew the head gaskets and stranded her/them twice. They had obviously used some kind of stop-leak in the cooling system. We bought all the parts to do the job and they fixed the head gaskets, etc., and then 100 miles after that the CVT transmission started lurching and not going into “move.”

      Thoughts of burning the car and the person who sold it to us entered our mind, but I suggested a Hail Mary pass to this Subaru dealer. We brought the car to them, they looked up the VIN and said: “This car never had the factory CVT recall service done. It has 1,500 miles left on the extended recall service warranty. We will repair and refurbish this transmission for FREE.”

      Thanks to their honesty, we now have a really nice car that runs correctly for about the price we would have paid for an honest-to-God really nice one in the first place. Their service techs. inspected the other work and the rest of the car and said it looked great. They think the car will run another 60,000 miles or more – easily – without any serious problems. It’s quiet and smooth and starts on the first crank in 10 degree weather and the 4WD works swell.

      So Subaru (at least as expressed through one good MA dealership) showed us the Love. That was the best thing that happened to us in 2021, after it was over.

    • The numbers are eerily similar to Europe’s. The good news is that we are informed that inflation is only between 5-7%, as long as you live in a remote unheated cabin and only eat pasta, milk and sugar.

    • “It’s COLD getting into the shower in the morning.”

      Maybe you need to join our blog host and nearly everyone else and move to FL. Though temps dipped into the 30s last night and this AM throughout FL; and it was cold getting into the shower. I, too, have electric heat in my FL home, and my electric bill cracked $40 last month!

    • @DP: Oh, hahah, you can Believe Me You that I’ve noticed our host’s implicit advice on many occasions and if I had the means to do so, I’d be driving a Corvette with him in Florida right now, parked right behind him at a mid-priced taco restaurant and taking videos of golden retrievers trying to chase squirrels up palm trees, instead of coping with the frigid northern blast we’ve been dealing with.

      Maura Healey is running for Governor! You just have no idea how seriously I wish I could flee, but it is mine to stand and fight, due to circumstances beyond my control.

  13. Today, I received my property insurance bills for three properties. Increases of: 13%, 23%, and 32%. My Dad saw only a 3% increase but got non-renewed and had to insure with the state’s insurer of last resort. A coworker initially was facing a 52% increase but was able to, also, get coverage w/ the state’s insurer of last resort and suffered only a 9% increase.

  14. Inflection is real and is on many fronts; even government fees and property taxes have gone up This is from the same government that was giving out free money, it is now charging more.

    For every 1 person our government “helps”, it causes injury to 100 others. Great progress from the progressives.

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