Don, my car guy, has a pretty good pulse on the economy.
First of all, he fixes cars—and that’s as basic a consumer spending item as it gets. Second, he employs people, so he knows what the labor market is doing. Third, he buys a lot of stuff—auto parts, certainly, but also utilities, office supplies, and new equipment.
So when I get my car fixed, I like to ask Don what he’s seeing.
Now, this may come as less of a shock to bond traders than before the last CPI number was released, and it may not matter to whatever low-level functionary in the statistical collection office of the Federal Reserve spends his day adjusting raw inflation data.
But what I will call “Don’s CPI”—the price of things Don buys for his business—has risen about 5% in the last year. And Don sees more to come.
So Don has raised his own prices 6%, in order to stay ahead of the curve. Last time I checked, that’s higher than any point on the yield curve.
Any resistance, I asked as I paid my bill? (My bill at Don’s—as I have said in the past—is always $700. No matter what gets done. It’s always $700.)
Don shook his head. “Business is booming.”
Jeff Matthews I Am Not Making This Up
© 2006 Jeff Matthews
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