This week in 1971, the Bee Gees started a four-week run at #1 with one of the slowest and wispiest songs ever written, the cloud-rendered hit “How Can You Mend a Broken Heart.”
The song was a tribute to the band coming back together after a tough breakup and period of anger and isolation from each other. It’s a love song for brothers as much as anything else. With a country loop and a classic harmony only the Bee Gees can bring, the song is hard to classify into any genre, although Al Green tried with his cover track of the song in 1972.
The song was made famous for a new generation as part of the soundtrack to the 2013 film American Hustle, a send-up of 1970s fashion masquerading as a crime drama. If you want to amp up your fashion game, it’s a must-see. The song by the Bee Gees takes it to another level.
This month’s economic indicators are a lot like that—at a level we just haven’t seen before.
Notice we’ve set an all-time high in population, meaning Rapid City’s trade area is now estimated to be above 150,000. Wages are up from last year’s numbers, gross sales are still ¾ of a billion dollars, and building and housing permits continue to blaze into the market.
There’s a dark side to all of this, however, and I don’t mean the period in the 1980s where the Bee Gees weren’t on the charts. It’s inflation, inflation, inflation. Inflation is such a problem at this point we’ve begun tracking it every month.
We’ve also started tracking the prime interest rate as part of our indicators. This will help our investors see the relationship between inflation and interest rates.
The long and the short of it is this — the fed has tightened interest rates by 75 basis points and is prepared to do it again next month. We’ve already seen nationally two consecutive quarters of negative growth (technically, a recession). And by the end of the year, we expect all of this tightening to start lowing prices and for inflation to be back into the 5% range. We are already seeing this with gasoline. Some are even predicting $2.99 gasoline again.
We aren’t getting too far ahead of ourselves, but all of this should also lower housing prices in the Black Hills somewhere in the range of 5%-8% and allow for the workforce (read: buyers) to possibly catch up just a little. From there, interest rates and inflation will continue to dance around each other until there is stability, meaning inflation runs 2%-3% year-over-year.
Our guess (and this is just a guess) is that this dance lasts for about 12 more months.