The most recent Labor Department report has not assuuaged the concerns about inflation on the part of the editors of the Wall Street Journal one bit:
The meaning of “transitory†is getting longer all the time. That’s one conclusion from the Labor Department’s report Wednesday for July that consumer prices rose 5.4% over the last 12 months. That’s two months in a row, after a 5% annual increase in May. When does transitory, in the Federal Reserve’s inflation lingo, become persistent?
White House economists looking for silver price linings can note that the monthly increase in the consumer-price index slowed in July to 0.5% compared to 0.9% in June. But the smaller increase was mostly due to used car prices stabilizing somewhat after months of astronomical growth. Inflation rose anyway.
Notably, the “core†CPI that strips out volatile energy and food prices increased 0.3% in July and 4.3% over the last 12 months. Prices last month rose for most goods and services including toys (0.4%), pet products (1.4%) and haircuts (2.2%). Rents climbed (0.4%) and have been accelerating.
Food prices surged 0.7% while restaurant meals rose 0.8%, the most since 1981. None of this is any surprise to Americans who have visited a supermarket or eaten out lately. Labor costs are rising as businesses have to raise wages to attract workers who can make more unemployed. The result: Higher prices.
Based on the conflicting reactions I’m seeing in various media outlets I suspect that reactions, based on party and ideology, are largely of the glass half empty vs. glass half full sort. I think some of the analysis is what you find when the innumerate (journalists) meet people who see things entirely in terms of numbers (the Fed governors).
What the numbers tell me is that inflation is continuing but it’s proceeding at a slower rate than before. Prices are still going up but they aren’t going up as fast as they were at one point. What will happen next month? Beats me. If I knew I’d be a commodities trader.
What I do know is that the administration’s preferred strategy, spending more money, would actually exacerbate the problem.
What the situation on the ground tells me is that those with incomes below the median are already hurting for basics like food and rent. What that portends for the mid-term elections, again, I have no idea.
I wish we had more bankers at the Fed and fewer econometricians.
No one is arguing that the price level is going back to the level it was 6 months ago; or that rate of increase in the price level is decreasing; they are talking that the rate of increase in the rate of increase in the price level is now 0 (i.e the 2nd derivative).
Everyone speaks about inflation as if it were omnipotent.
We’ll see what the market will bear, my hunch is that higher prices will slow sales and services as the vast majority of Americans are still paycheck to paycheck and will remain so as long as interest rates make saving money unappealing.
As I’ve pointed out numerous times, “inflation” affects people differently in different age groups and buying preferences. One thing for sure, stripping energy and food, which comprise a significant fraction of household spending in the name of data smoothing is just an excuse for mischief. Here are some other significant numbers:
Household durables +7%
Electronics +4% (and they are traditionally negative)
Cookware +6%
Lawn and garden +3%
And all are past the dip from last year. Energy, food and household goods, all up 4-8%. I guess if you are homeless you don’t care about inflation. Otherwise………
The biggest item in our budget is insurance, and increases have been relentless.
Energy costs combined are certainly next, and nothing else is even relevant.
Food is so cheap that it’s negligible.
But I suppose the truly poor pay next to nothing for the first two on our own list.
Insurance has certainly gone up, especially here in fire-prone CA. However, it’s building materials that we’ve seen a head-splitting rise in costs!