I haven't noticed. Are prices high? Then again, the Spritzler Report is produced in a cave to avoid being invaded by the Far left. We don't get out much.
The battle against inflation is essentially over, but it might not feel that way
The Fed’s rate cut is a major milestone, but inflation lingers: just look at the price of eggs, up 60% since August 2020
William Coulman, David Crowther, Sherwood News
9/20/24 10:45AM
This week, the Federal Reserve slashed interest rates by 0.5%, the first cut since the pandemic, signaling a major turning point in the battle against America’s least-favorite word of recent years: inflation.
The big picture
Why the Fed chose this exact moment to cut the cost of borrowing is a long story. The short version is that prices aren’t rising as fast as they used to be, and the Fed’s leadership now think it’s worth stimulating the economy. The latest Consumer Price Index report reveals that inflation has dropped to 2.5%, inching closer to the 2% target, and way down on the mid-2022 peak of 9.1%.
One of our favorite refrains around here is to remind everyone that inflation dropping from 9% to 2.5% doesn’t mean prices are falling — they’re just rising at a slower pace. And if you dig into the BLS data, you’ll find very few items that have increased by exactly 2.5% between August 2023 and August 2024. Eggs, housing, car insurance, and sports tickets have all risen more than that 2.5%, while TVs, smartphones, and car rentals have all fallen in price.
The bigger picture
Whether this new low is a win for those who argued inflation was “transitory” back in 2021 is debatable. But inflation compounds over time, which is why the lingering effects will be felt for years.
Indeed, people don’t tend to confine their comparisons to neat 12-month periods. Many of us think back a bit further, remembering what prices were before inflation started dominating headlines. On that measure, things look very different.
Since August 2020, when pandemic lockdowns still loomed large over our daily lives, prices across goods and services for consumers, the broadest measure we have, are up 21%. Eggs are up more than 60%, gasoline — despite falling more recently — is 56% more expensive. Electricity is nearly 30% more costly, and on average eating food outside of your home will set you back 25% more, which is arguably why the value meals from fast food outlets like McDonald’s have proved so popular.
Only a few categories have seen price drops, with electronics consistently bucking the inflationary trend thanks primarily to the BLS’s hedonic quality adjustments, which takes the quality of products into account.
Of course, inflation in isolation isn’t the end of the world if wages keep pace. But, for more than 2 years, they didn’t.
Even though wage growth spiked to over 8% in April 2020, inflation soon outran it. From April 2021 through early 2023, inflation consistently exceeded pay raises, shrinking workers' real buying power. Indeed, it wasn’t until the summer of 2023 that employees finally saw their wages outpace inflation — marking the first period of "real" wage gains in two years.
However, this positive shift wasn’t enough to erase the damage, which is probably why so many Americans feel the economy is doing poorly, and inflation remains commonly cited as the number one issue in America, despite many economic datasets signaling that things are broadly okay. The Misery Index, a simple combination of the unemployment rate and the inflation rate, being a prime example: it’s at 6.8%, well below the average for the last 50 years of 10%+.
As our colleague Matt Phillips wrote this week, there are a lot of reasons to think that an economic vibe shift could be just around the corner:
Stock prices are near records, gas prices are falling, and the Fed is cutting. Will it be enough to lift the sour consumer mood that set in during the pandemic?
But, for many Americans, the sting of higher prices still lingers. Like all pain, it might just take some time, and in this case maybe a year or two of inflation-busting pay hikes, to forget.
コメント