Before the pandemic, inflation hovered around 2 percent as measured by the overall Consumer Price Index and by a “core” measure that strips out food and fuel prices to get a clearer sense of the underlying trend.
It dropped sharply at the pandemic’s start in early 2020 as people stayed home and stopped spending money, then rebounded starting in March 2021.
Some of that initial pop was due to a “base effect.” Fresh inflation data were being measured against pandemic-depressed numbers from the year before, which made the new figures look elevated.
But by the end of summer 2021, it was clear that something more fundamental was happening with prices.
Demand for goods was unusually high: Families had more money than usual after months at home and repeated stimulus checks, and they were spending it on cars, couches and deck furniture.
At the same time, the pandemic had shut down many factories, limiting how much supply the world’s companies could churn out. Shipping costs surged, goods shortages mounted, and the prices of physical purchases from appliances to cars jumped.
By late 2021, a second trend was also getting started. Services costs, which include nonphysical purchases like tutoring and tax preparation, had begun to climb quickly.
As with goods prices, that tied back to the strong demand. Because households were in good spending shape, landlords, child care providers and restaurants could charge more without losing customers.
Across the economy, firms seized the moment to pad their bottom lines; profit margins soared in late 2021 before moderating late last year.
Businesses were also covering their growing costs. Wages had started to climb more quickly than usual, which meant that corporate labor bills were swelling.
Fed officials had expected goods shortages to fade, but the combination of faster inflation for services and accelerating wage growth captured their attention.
~
NYT – Inflation Is Still High. What’s Driving It Has Changed.
I’ll never understand how Republicans go on and on about how they love capitalism and how the market is responsible for everything and if something is expensive, why, that’s the free market. Then as soon as inflation hits or gas prices get higher because of global demand, then all of a sudden they want the government to do something about it.
ibFrank 11 months ago
Stop buying so much.
braindead Premium Member 11 months ago
Maybe some more tax cuts.
That’s always worked before.
.
And if that doesn’t work, we can have more market concentration by mergers and acquisitions.
pschearer Premium Member 11 months ago
The Fed considers “under control” to mean 2% inflation. That just means it will take a little longer to erode your life savings.
RobinHood 11 months ago
And the silken, sad, uncertain rustling of each purple curtain
Thrilled me—filled me with fantastic terrors never felt before;
So that now, to still the beating of my heart, I stood repeating
“’Tis some visitor entreating entrance at my chamber door—
rossevrymn 11 months ago
No Ideas Saturday
Silly Season 11 months ago
Before the pandemic, inflation hovered around 2 percent as measured by the overall Consumer Price Index and by a “core” measure that strips out food and fuel prices to get a clearer sense of the underlying trend.
It dropped sharply at the pandemic’s start in early 2020 as people stayed home and stopped spending money, then rebounded starting in March 2021.
Some of that initial pop was due to a “base effect.” Fresh inflation data were being measured against pandemic-depressed numbers from the year before, which made the new figures look elevated.
But by the end of summer 2021, it was clear that something more fundamental was happening with prices.
Demand for goods was unusually high: Families had more money than usual after months at home and repeated stimulus checks, and they were spending it on cars, couches and deck furniture.
At the same time, the pandemic had shut down many factories, limiting how much supply the world’s companies could churn out. Shipping costs surged, goods shortages mounted, and the prices of physical purchases from appliances to cars jumped.
By late 2021, a second trend was also getting started. Services costs, which include nonphysical purchases like tutoring and tax preparation, had begun to climb quickly.
As with goods prices, that tied back to the strong demand. Because households were in good spending shape, landlords, child care providers and restaurants could charge more without losing customers.
Across the economy, firms seized the moment to pad their bottom lines; profit margins soared in late 2021 before moderating late last year.
Businesses were also covering their growing costs. Wages had started to climb more quickly than usual, which meant that corporate labor bills were swelling.
Fed officials had expected goods shortages to fade, but the combination of faster inflation for services and accelerating wage growth captured their attention.
~
NYT – Inflation Is Still High. What’s Driving It Has Changed.
Havel 11 months ago
Since only anecdotal evidence seems to register with some, I paid $1.49 for a dozen eggs yesterday.
jconnors3954 11 months ago
Helium or hot air?
martin_goetz Premium Member 11 months ago
I’ll never understand how Republicans go on and on about how they love capitalism and how the market is responsible for everything and if something is expensive, why, that’s the free market. Then as soon as inflation hits or gas prices get higher because of global demand, then all of a sudden they want the government to do something about it.