Jim Ulvog

Personal Consumption Expenditure for January 2022 shows ongoing high inflation, with year-over-year increases at the highest level in four decades.

Well, the PCE increased the most in only 39 years, but that’s really close to four decades.

The headline Personal Consumption Expenditure (PCE) inflation index increased 0.6% in January 2022 following December’s increase of 0.5%, which was revised upward from previously reported 0.4%. That follows 0.6% in November and 0.6% in October 2021.

The core PCE inflation rate (without food and energy) was 0.5% in January, matching the 0.5% increase for the previous three months. The October 2021 increase was revised up 0.1%.

The cumulative 12-month change for 2021, according to BEA, is up 6.1% overall and 5.2% excluding food and energy.

Ouch and ouch.

Personal Consumption Expenditure for December 2021 shows ongoing high inflation – 5.8% for 2021.

The Personal Consumption Expenditure (PCE) inflation index increased 0.4% in December 20212, which is a slight decline from 0.6% in November and 0.6% in October 2021. The December increase is in line with 0.3% to 0.5% for prior five months.

The core PCE inflation rate (without food and energy) was 0.5% in December following 0.5% November and 0.4% in October

The cumulative 12-month change for 2021, according to BEA, is 5.8% overall and 4.9% excluding food and energy.

In spite of what you see with your own eyes, the Department of Agriculture says food inflation in 2021 was the same as 2020. Don’t hurt yourself laughing.

Yeah, the research wizards at the Ag Department concluded food inflation in 2021 was exact same as 2020. We will see even smaller price increases in 2022.

US Department of Agriculture – 1/28/22 – 2021 retail food price inflation continued at the same pace as 2020, but varied among food categories – In a clever disinformation effort, the alleged economists at the Economic Research Service of the U.S. Department of Agriculture claim food prices increase of 3.5% during 2021 was the same rate of increase as in 2020. The mere 3.5% during 2021 is only slightly higher than the historical average of 2% from 2000 through 2019.

In newsflash to everyone who actually buys groceries or goes to a restaurant, food prices barely increased in 2021.

(Discussion cross-posted from my other blog, Nonprofit Update, because understanding impact of high inflation on our clients helps us serve them better.)

Because of the pushback this article is already receiving, it will likely be memory-holed momentarily so I will quote a few parts of the article. Will quote the entire article at the end of this post.

The headline information:

“Retail food prices increased by 3.5 percent in 2021, equal to the rate in 2020 and greater than the historical annual average of 2.0 percent from 2000 to 2019. Of the 12 food categories depicted in the chart, six showed slower price increases in 2021 compared with 2020.”

Prices for half the food you buy are coming down. Cool, huh?

20th anniversary for Ulvog CPA.

Image courtesy of Adobe Stock.

Today, January 28, 2022, marks the twentieth anniversary of the Ulvog CPA firm.

It has been a joy to serve the nonprofit community for these two decades as an independent CPA firm. Focusing on the religious nonprofit community has been a professional honor and a personal delight.

Thanks to all the organizations who have made this journey possible.

Looking forward to many more years of serving churches and ministries.

God’s blessings to you all.

All the convictions in the U.S. for Libor manipulation have now been overturned.

Image courtesy of Adobe Stock.

After the Great Recession back in 2008, there was great hue and cry demanding that hundreds of bankers be thrown in prison, every one of them to spend the remainder of their life in a dank, dark dungeon.

Nice concept.

Has a good, solid, rewarding emotional feel. Just the thought all those horrible bankers in jail gives you a warm fuzzy feeling all over.

The only problem is for that to happen, federal prosecutors have to actually, you know, prove their case.

Little teeny, tiny problem standing in the way – – proving manipulation is difficult.

So difficult that all convictions for alleged LIBOR manipulation in the United States have now been overturned.

So much for throwing all the bankers in jail.

The core challenge is proving one specific individual committed a specific crime. A particular bank as a whole may have committed crimes, which can be proved. A department overall can be shown to have committed a crime. The challenge is to prove one specific guy over there, yeah that one, had intent to and did violate a specific criminal code.

Wall Street Journal – 1/27/22 – All US Trial Convictions and Crisis-Era LIBOR Rigging Have Now Been Overturned – Three traders from Deutsche Bank were convicted at trial in 2018 for manipulating LIBOR. The charges were wire fraud, which is exquisitely broad.

The Second Circuit Court of Appeals reversed the convictions.

More depressing news on federal judges not recusing themselves from cases. Three resignations by senior officials of the Fed because of their stock trading.

Image courtesy of Adobe Stock.

News keeps rolling in about senior Fed officials trading stock when they have extremely valuable inside information. Tally grows of federal judges who did not recuse themselves when they had a financial interest in a case they were hearing. Oh yeah, Chief Justice Roberts of the Supreme Court had his own failure-to-recuse oopsie.

This round of lack-of-integrity-by-senior-officials news reports, federal edition:

  • 800 more failure-to-recuse by federal judges. The Chief Justice did not recuse himself until after oral arguments in a case where he had a mere $100K personal investment in one of the litigants.
  • Vice Chair of the Fed resigns after news leaks out of timing for his stock trades.
  • Previously, two regional bank presidents of the Fed resigned this past October.

More explanation why the entire supply chain system is overloaded.

The supply chain is complicated. There is no switch you can throw to magically make all those connections smoothly work together again. Image courtesy of Adobe Stock.

The supply chain for everything is tangle up to the extent it will take lots of time to function normally again.

Two articles describing the depth of issues:

  • Analogy of turning off a complex computer system. Some of the hundreds of components won’t work when you throw the ‘on’ switch.
  • Description of the demand side pressure on supply chain. All those trillions of federal dollars sloshing around have created demand which has overloaded distribution systems.

(Cross posted from my other blog, Nonprofit Update, because it will be helpful to understand broad supply chain issues for audits during the upcoming busy season.)

American Thinker – 12/11/21 – We broke everything in the name of Covid – Author ran a large IT department at one point in the past. Every few years they had to shut down the entire computer system so that the factory could go through maintenance of the electrical system.

Two former KPMG partners involved in PCAOB inspection leak fiasco surrender their CPA licenses.

Image courtesy of Adobe Stock.

There’s an old saying that the wheels of justice grind slowly, but they grind very fine. In the accounting world the wheels of justice don’t even start to turn until the criminal justice wheels have ground everyone into powder.

Effective this past August and November two of the key former partners from KPMG involved in the PCAOB inspection cheating scandal surrendered their licenses.

Personal Consumption Expenditure index for November 2021 shows continuing high inflation.

The Personal Consumption Expenditure (PCE) inflation index increased 0.6% in November.  This after the 0.6% in October 2021 increase was revised upward from 0.6% to 0.7%.

The core PCE inflation rate (without food and energy) was 0.5% in November and 0.4% in October.

This indicates inflation is continuing. When you look at all of 2021 perhaps inflation is accelerating.

Disciplinary actions from California Board of Accountancy – Fall 2021

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The California Board of Accountancy Update newsletter, issue #94 dated Fall 2021, has details of disciplinary actions with effective dates in summer and fall of 2021.

A simple lesson for all CPAs from these situations is just do your job with at least a bare minimum of competence. The firms below didn’t get in trouble because they missed some SASs or were oblivious to some new or big or recent ASU. They didn’t get in trouble because a client lost out on a contested tax position. They didn’t get in trouble because they fell a few hours short on CPE or miscounted A&A hours.

No, they had splendiferous belly-flops from the 50 meter high dive. Examples?

Federal mileage rates for 2022.

Image courtesy of Adobe Stock.

The IRS has published the reference amounts for mileage rates for 2022. The rates:

Beginning on January 1, 2022, the standard mileage rates for the use of a vehicle will be:

  • 58.5 cents per mile driven for business use, up 2.5 cents from the rate for 2021,
  • 18 cents per mile driven for medical or moving purposes, up 2 cents from the rate for 2021, and
  • 14 cents per mile driven in service of charitable organizations.

The standard rate for business is based on their analysis of the fixed and variable costs of operating a vehicle.  The medical & moving rate is based on variable costs of operation.

Rates were published in Notice 2022-03  2022 Standard Mileage Rates.

Producer Price Index increases 0.8% in November 2021.

The Producer Price Index (PPI) in November 2021 shows inflation is running hot with 0.8% increase for the month.

This follows revised 0.6% for each of the three previous months (August, September, October).

I suppose this four-month run can be considered an improvement over the previous four months which were 1% in April and 0.9% in each month of May, June, and July.

That is an average of 6.5% for the last four months, down from an average of 9.25% for the preceding four months. The average monthly increase in the PPI for 2021 is a whopping 0.82%. Per month.

Graph at the top of this post shows the monthly change in final demand (the headline number) in blue. The average of the change for the latest three months is in green. The red line shows core change, which excludes food, energy, and trade.

The PPI calculation has many subcomponents, just like the CPI and PCE. Let’s look at the breakout between producer price increases for final goods and increases for final services. Following graph shows Total final demand, Final demand goods, and Final demand services. In other words the total price run up with a breakout between goods and services:

Inflation is going to continue at high rate, if not accelerate.

Illustration of what 5% inflation does in one year. Image courtesy of Adobe Stock.

Variety of articles are pointing towards higher inflation on the horizon. An increasing number of articles I’ve seen point towards inflationary expectations getting built into thought process of consumers and companies.

Articles for your consideration:

  • Kraft Heinz product line will see an average of 5% increase at the start of 2022.
  • Many companies are planning large raises in 2022, averaging 3.8% in one survey.
  • Background article by AP speculates high inflation will continue well into 2023. Other articles are providing similar speculation.

Post-Millennial – 11/9/21 – Kraft Heinz to raise prices of products up to 20% – Average price increases by Kraft Heinz for the entire product line will average 5% starting 1/9/22. Specific product lines will see dramatic increases, such as 16% for Jello and puddings, 10% for Bagel Bites, with the headliner of 20% being Mac & Cheese.

Consumer Price Index increases 0.8% in November 2021 after 0.9% run-up in October. Twelve month increase rises to 6.9%.

The Consumer Price Index (CPI) increased 0.8% in November after a 0.9% increase in prior month.

That is 2.1% for the last three months, which would be about 8.4% if the increase in the last three months continued for a year.

Graph at top of this post shows the monthly increase in the all-items index along with the core change, which excludes food and energy. Graph also shows an average of the preceding 12 months for the all-items indicator.

The 12 month cumulative change is distressing. The monthly change in all items index and the cumulative change for 12 months looks as follows: