It is hard to believe. Forty-four years ago today as I was driving to my shift at McDonalds the breaking news came over my 1971 Duster AM radio. Scratchy sound and all, it was heart breaking news. The King, Elvis Presley was dead at only 42 years of age. For the Baby Boomer generation in particular, Elvis was ubiquitous in the 1960’s and 1970’s. However, it was more than just his movies, concerts and many hits that were played on the radio. A whole industry of impersonators made it so you could not go to a bar or event without running into a white sequined jump suit, black haired, sunglass wearing crooner singing Love Me Tender. Nothing was off limits to Elvis impersonators as far as performance. Yes, many couples were brought together not only in Las Vegas but across the nation by Elvis Wedding Officiants. The craziness ebbed over the years as we all got older. But Elvis’s music? Still classic as the time has passed.
The higher oil prices continue to impact the oil rig numbers. We finally breached the 500 rig level since things fell apart during the pandemic. Prior to 2020 the US reached 850 in open oil rigs. That number dropped to a low of 180 in May 2020. The increase in the rigs is helping US oil production levels, thus stabilizing the market. We appear to have hit a rough equilibrium in the market which is holding both the price of oil and a gallon of gas in a narrow range. Between the Biden Administration asking OPEC to add more production and the increase in rigs, we can expect oil prices to subside, particularly if the new COVID surge dampens economic activity.
Japan announced on Thursday of last week that the current Delta variant is running rampant and they have no way to control the spread in Tokyo. China is also under siege with a rapid COVID spread. In the past week China shut down the Ningbo-Zhoushan Port due to one confirmed case of COVID. A couple of weeks ago I shared that the California ports were backing up due to staff issues caused by COVID. That back log is being cured as we speak. The shut down of one or more ports in China does indicate that the supply shortage of product is likely long term in nature either on the shipping side and/or the receiving side.
Is the inflation level plateauing? The Producer Price Index for July rose by 1%, the same as in June. The crux of the increase in prices in July came from service costs, not from the cost of hard goods. The cost of goods rose by .6% which was less than the number from June. The service cost price increase came directly from wage push inflation. That is a good sign as that is typically not a continuous inflation source. If the cost of hard goods prices stabilizes, we could see a flattening of the inflation curve this Fall.
Core inflation for July rose .3% and was the lowest increase in four months. Core inflation is for all items less food and energy. The highest push point in the Core Inflation level was shelter, meaning rent and mortgage payments. When the housing market cools and the level of open rental units increase the core inflation should abate. If gas prices come down, the only inflationary point in the economy might be food. While that might reduce or soften the inflation level this Fall, it is the one area that catches everyone’s attention since it is a staple item. If electronics, cars, books or travel drops in price few really notice. However, if eggs, meat and cereal continue to rise, well, we are already seeing the negative poll numbers rising. It is one of those areas that arouses the most anger.
Over the past 44 years I can only think of one time where we were facing so many negative challenges. That would be 2007-8 when the great recession hit. Right now, our leadership is facing an immigration crisis, the loss of 20 long hard years of sacrifice in Afghanistan, a resurgence in the pandemic, inflation, economic uncertainty, as well as domestic issues that seem to just pull us apart. Back in 1977 if you were out of work or facing tough times, there was always a black wig, sunglasses and a sequin suit to throw on while singing Hunka Hunka Burning Love. Those were the days.
