A Year in the Life of Consumer Prices: Inflation, Consumer Prices, and Costs of Goods and Services Over the Last Four Decades
The election comes as consumer prices are climbing at near the fastest pace in four decades. Inflation was 8.2% in September. That’s down only slightly from the 9% rate in June, which was the highest since 1981.
The cost of food and hotels went up significantly in September, pushing up prices at restaurants and hotels. Food prices rose 14.5 percent last month from a year earlier, the largest annual rise in more than 40 years, according to the Office for National Statistics. High energy costs were still contributing to inflation growing at its fastest pace in decades. Core inflation, which excludes food and energy prices, rose from 6.3 percent in August to 65 percent in September, as price increases were widespread across goods and services.
Still, Fed officials and Wall Street analysts will be more closely watching the monthly figures, including what happened between August and September. While the annual numbers reflect what has happened cumulatively over the past 12 months, the monthly data give a clearer snapshot of how prices are evolving in real time.
The latest inflation data, not adjusted for seasonal swings, shows price hikes have now slowed to 7.1% for the year through November, after hitting a pandemic-era peak of 9.1% in June, according to the Bureau of Labor Statistics.
According to new data from the University of Michigan, inflation is good news for consumers because it helps to perk up their economic sentiment during December.
The Personal Consumption Expenditures measure will not be released until late October but the Fed considers it to be an inflation gauge and aims for 2 percent annual inflation.
Because fast inflation has lingered for more than a year and half and has broadened to an array of goods and services, central bankers are likely to remain squarely focused on wrestling inflation lower.
Since March, the Fed has raised its benchmark rate six times, driving up borrowing costs for anyone trying to buy a house or a car or carrying a balance on a credit card. The Fed may have to increase rates even more next year than they currently are, according to chairman Powell who warned last week.
Fruits and vegetables surged 1.6% for the month, while cereals and bakery products rose 0.9%. Other groceries increased 0.5% in September, following a 1.1% increase in August.
Sweets of all kinds are costlier than last year, driven by major increases in the prices of sugar and flour. Since the beginning of the year, sugar has gone up over 17%. Supply chain disruptions and a dismal sugar production year have helped contribute. The price of flour has gone up by an additional 24%.
Ramon Laguarta said on an earnings call that the environment was “very inflationary” with a lot of supply chain challenges. The company’s prices increased 17% annually.
Demand is high. Consumers are able to pull back on discretionary items, but they must eat. Even though the swine flu decimated the world, people are still working from home and consuming more food than before.
Many people have cut back on their shopping budgets because of inflation. While they spent more on necessities like food and gas, shoppers pulled back from discretionary items, like clothes and home decor.
Those who prefer treat over trick will be paying 13.1% more than last year, according to the most recent inflation report from the Bureau of Labor Statistics.
It’s the largest yearly jump in candy prices the CPI has ever recorded. (For comparison, it took nine years — from 1997 to 2006 — for candy prices to rise 13%.)
Americans collectively are expected to spend about $3.1 billion on candy this season, according to the National Retail Federation, an industry trade group.
The price of clothing has gone up 5.5% since last year, but the report doesn’t track costumes. Those crafty enough to make handmade costumes will feel the pinch even more: Sewing machines, fabric and supplies are up 11% since last September.
The countries with bigger supply shocks are trying to address energy prices. The Department of Energy is planning to release 15 million more barrels of oil from strategic reserves.
Policymakers’ initial instinct during the pandemic was economic preservation. To prevent Covid from setting off a deep recession, they enacted relief measures. They might have gone too far because the point of the packages is to keep the economy afloat. Prices will rise if supply can not keep up with demand.
The central banks were too slow to respond once they did because they thought the impact of global catastrophes would fade. Inflation went up without warning.
The US had two problems. America spent the most money on economic relief of any country in the world, and it is possible that this resulted in too much demand and higher inflation. And for much of 2021, the Federal Reserve viewed rising prices as a temporary phenomenon; it didn’t acknowledge that inflation was enduring until late last year.
Other factors have undoubtedly contributed to high inflation, including the lingering effects of the pandemic and Russia’s invasion of Ukraine. Inflation in the UK and Eurozone has been higher than in the US largely because of soaring energy costs related to the Ukraine war.
If it weren’t for the war, the U.S. could still be worse off than the others. America still has a higher core inflation rate, which excludes food and energy prices, than many of its peers — indicating it has deeper problems than the global events that are primarily driving up food and energy costs. The labor market in particular remains hot, with an unusually high number of job openings for each unemployed worker. These are the problems that the Fed is trying to address without causing a deep recession (as I explained in this newsletter).
The Great Recovery from Inflation: State of the Art in Britain and the Role of the Relief and Tax Cuts in Predicting the Prices of High Energy Costs
Consumer prices in Britain rose in September, continuing their climb as the country grapples with high energy costs and political uncertainty.
It is a sign that politicians and policymakers in all of the world are faced with high inflation. Increasing interest rates is an attempt to send a clear message that inflation will not get out of hand in the economy, and that the central bank will not let price increases get out of hand.
Nearly half the voters surveyed in the NPR poll say Republicans would do a better job of controlling inflation, compared to just 27% who think Democrats would be more effective. Republicans have been able to manipulate voters’ frustration over rising prices by offering few concrete prescriptions for bringing inflation down.
When President Biden took office, there wasn’t any concern about inflation. Although the pandemic had triggered isolated price increases for things like lumber — the overall cost of living was climbing at less than 2% per year.
The incoming administration was more concerned about jobs — fearing a repeat of the sluggish recovery that followed the global financial crisis. The rate of unemployment was 6.4% in January of last year, down from 15% at the beginning of the year. But with COVID-19 cases climbing, the economy had lost 115,000 jobs the month before Biden was sworn in.
The economic relief bill contained direct payments to most adults, as well as extended unemployment benefits and a new child tax credit.
As an economicStimulus it was a success. Employers have added more than 10 million jobs since Biden took office. But Republicans blame the aggressive relief bill — which passed with no GOP support — for fueling runaway prices.
“Now the bathtub is full, which is an outcome I have warned against,” said the former Treasury Secretary. “And it’s much easier to stop a bathtub from overflowing than it is to get the water back.”
“Step one, we’ve got to do in government what families do. You live within your means,” said Scott, who chairs the Republican Senate Campaign Committee. “On top of that, we’ve got to figure out how to produce energy in this country safely.”
The Rise and Fall of the Gas Prices: Car Rentals, Food Prices, and Travel Trends in the Light of the 2018-2019 Pandemic
Gas prices are back to last year’s levels, after spiking to a record high of just over $5 a gallon this summer. For perspective, a gallon of regular has fallen by almost 50 cents in just a month, making it about $10 cheaper to fill up an average SUV today than a month ago.
Rental car companies had to sell their cars to raise cash during the early months of the Pandemic. With automakers still not back to full production due to a shortage of parts needed to build cars, including computer chips, it’s taken a while for the rental car companies to replenish their fleets to meet demand. The good news is that October CPI data shows car rental prices are down 3.5% from where they stood in October of last year, and down 15% from the record set in June 2021. Still, rental cars are 46% more expensive than they were in October 2019.
Demand for air travel went up this year after going down in 2020. The price of plane tickets grew 36% annually in the year through November.
A surge in Covid-19 cases at the end of 2021 depressed demand for leisure travel, but this year it’s positively robust, according to the airlines and industry experts.
“Holiday travel has come back as strong as ever, and leisure travel is why that recovered,” said Scott Keyes, founder of travel site Scott’s Cheap Flights. Over Labor Day and July 4 there were so many people that wanted to travel, and we are going to see that over Thanksgiving and Christmas.
The price is 8% higher than a year ago. The price of gas is usually low at the end of the year, but can be found just before Christmas.
A key inflation gauge shows that the price pressures cooled in November despite the Federal Reserve’s attempts to fight inflation through higher interest rates.
As fuel prices fall, however, food prices have been climbing. A 8.9% increase in the price of lettuce led to grocery prices rising in November.
The Rise and Fall of U.S. Consumer Prices in the Light of Refinitiv’s First Year Low-Year Loan Rate Measurements
US stocks fell immediately after the report, as economists surveyed by Refinitiv had expected wholesales prices to have risen just 7.2%, annually. Concerns about whether the Federal Reserve will be able to slow the pace of rate hikes have been raised by the higher-than- expected inflation readings.
But futures for the Fed funds rate still show a strong likelihood of a half-point increase at the central bank’s policymaking meeting next week, rather than the three-quarter point hike instituted at the last four meetings.
The Consumer Price Index is a more important measure of prices paid by US consumers for goods and services. It’s rare for the report to come out before the report on the Consumer Price Index on Tuesday.
“Next Tuesday’s CPI release will be more important than today’s data, but with traders on edge, any indication that prices remain elevated and that inflation is more sticky than currently believed is a negative for markets,” said Chris Zaccarelli, Chief Investment Officer for Independent Advisor Alliance.
The corePPI rose 4.4% for the year ending in November, down from a revised 6.8% increase the previous month. The economists expected a 5.9% increase.
It’s too soon to declare victory over inflation, but from gas to chicken to big-screen TVs, there are, increasingly, signs that inflation’s grip on American pocketbooks may be loosening.
As inflation appeared to slow down, all this happened. The same categories have seen prices fall: cars, gas, furniture and appliances. Stores pushed big sales on things like clothes, TVs, computers and phones as they faced a lot of inventory.
Retailers awash with excess inventory are expected to keep marking down goods into the end of the year, as consumers shift from buying couches and clothes to spending on travel and experiences — where prices are not coming down for now.
Commodities and shipping costs are falling as global supply chains work themselves out. Rent and automobile prices are still rising but at a slower rate. Chicken prices went up after hitting a record high this summer. According to RealPage, apartment rents have fallen for three consecutive months.
At this time last year, economists were hopeful that snarls in global shipping and manufacturing would soon clear; consumer spending would shift away from goods and back to services; and the combination would allow supply and demand to come back into balance, slowing price increases on everything from cars to couches. Slowly, that has happened. It took longer than expected to bring down consumer prices.
Service inflation is closely related to the job market. The biggest costs for businesses are paying employees and tax accountants. Businesses are more likely to raise prices when workers are hard to find and wages are increasing quickly.
The unemployment rate is low and the wage growth is rapid, this could help keep inflation at bay even if the job market isn’t driving it.
That is where the Fed policy could come in. Companies can only charge more if their customers are able — and willing — to pay more. The Fed can stop that chain reaction by lifting interest rates to slow demand.
Gasoline and grocery prices moved in opposite directions last month, as the overall inflation rate declined slightly. Consumer prices in November were up 7.1% from a year ago, compared to an annual increase of 7.7% the month before.
Housing Costs Revisited after the Labor Department Increased Rates in the First Month of Term Loan Inflationary Expansion
The Federal Reserve will hike interest rates for the seventh time in 9 months on Wednesday, just as the Labor Department releases the inflation figures.
The gas price has fallen by 2% since October, and is currently selling for less than it was a year ago.
A wholesale box of romaine lettuce that is usually only available on the east coast is costing up to $100 a box because of high transportation costs and problems in California.
lettuce production was curbed due to an insect-borne virus. And while gasoline prices have tumbled, the diesel fuel used to truck vegetables still costs nearly $5 a gallon.
“It is too early to say that inflation is gone,” said the Fed chairman two weeks ago. “But if current trends continue, goods prices should begin to exert downward pressure on overall inflation in coming months.”
The cost of renting a home in April was 14 percent higher than a year earlier, according to a data company. By September the annual increase had fallen to 10% due to softer demand.
“People are now, as a result of high rent, doubling up again, so we’re seeing an increase in the number of people moving in with roommates,” said CoreLogic economist Selma Hepp.
The official inflation data does not show a complete slowdown in housing costs because Rents are only reflected gradually in the data.
The Fed chairman doesn’t think prices of services are as good as they could be because they are driven by the cost of labor.
Retail Sales in November Compared to November 2013: Evidence from the Wells Fargo Large Scale Research Collaboration (GRS) Project at the CERN SPS
Last November was a time when people were in the midst of a shopping frenzy because of the Pandemic. This holiday season, the National Retail Federation still expects shoppers to spend between 6% and 8% more than they did last year.
Compared to a month earlier, people spent less on cars and gas, clothes and sporting goods, furniture and electronics. At the same time, spending kept climbing at grocery stores and at restaurants and bars.
The retail sales report shows that a consumer is much more engaged in the real world service economy compared to a year ago, wrote economists from Wells Fargo.
What’s For Dinner? The Comeback Year of Inflation, Competition, Trade War, and the Rise and Fall of the Standard Stores
Breakfast is the most important meal of the day and has gotten more expensive. Eggs were an inflation high-flyer, largely because of a historic bird-flu outbreak. Butter and milk prices increased because of lower dairy production. The war in grain-producing Ukraine boosted bread prices. At least bacon and avocados are giving us a break. So is pork. It’s What’s For Dinner—and breakfast?
After cooped-up 2020 and 2021, this was the comeback year. Movie theaters and concert venues filled up. Big demand plus hiring difficulties and higher food costs pushed up menu prices. When people didn’t need anymore, the stores were overstocked and gave us some of the biggest discounts around.
This was the year when raises were quickly eaten by inflation. A pandemic-fueled unionization wave continued, though it began to slow. And forget “quiet quitting” – people actually quit jobs and took new (better?) ones at such a rapid pace that nationwide productivity took a hit as workers settled in to new positions (at least that’s the most optimistic explanation).
Source: https://www.npr.org/2022/12/22/1144157601/inflation-pricier-cheaper-2022-charts
Inflation Price-Caaffer 2022-Charts: A Realistic Year Compared To The Cold War In the U.S
Savers! Sure, planes, hotels and automobiles (fuel and maintenance) got more expensive, but have you considered an ocean liner? It may not take you many places in the U.S., but at least the CDC is sort of on board now?
It was back to the future for markets. Energy trade was disrupted because of the war in Ukraine. Oil companies had a banner year thanks to pumped-up prices. The metaverse got a reality check. The tech- heavy exchange lost a third of its value.
Seen this way, 2022 wasn’t a terrible year overall. The economy grew and supply chain pressures became less severe. As long as you don’t need to buy anything or borrow any money, things are looking pretty good!
Source: https://www.npr.org/2022/12/22/1144157601/inflation-pricier-cheaper-2022-charts
The November Progress in the Predictive Compensate Inflationary State of the United States, a Report from February 2022 to March 2021
Calculations rely on the latest data. Most compared November 2022 to November 2021. The prices of theavocado are from December. The data is from October. The stock prices and other data were from December 21 this year. It is calculated against the U.S. dollar. The dollar is measured against a basket of currencies.
The core PCE which excludes the volatile food and energy categories was up 4.7% annually and just 0.1% on a monthly basis, matching expectations of economists.
The annual increases for both PCE inflation indexes hit their lowest levels since October 2021 and follows continued declines in other inflation gauges, such as the Consumer Price Index and Producer Price Index.
Friday’s report also showed that spending continued to rise in November, but at a much slower pace than in previous months. Spending was up 0.1% in November as compared to 0.8% the month before. In November, personal income increased by 4% but it decreased in October.
The November PCE report, the last major inflation gauge released in 2022, provided a snapshot of an economy in transition. Tasked with reining in the highest inflation since the early 1980s, the Fed has undertaken a series of blockbuster interest rate hikes to squelch demand.
Inflation within the services sector hasn’t abated in a hurry. Friday’s PCE report showed the services index posted a monthly increase of 0.4% – unchanged from October’s rate – and a year-over-year increase of more than 11%, Faucher noted.
Strong wage growth could be a problem for the Fed because it could lead to higher services prices and overall inflation.
Wage growth and service inflation are slowing, and the Federal Open Market Committee will continue increases in the fed funds rate until it becomes more apparent that the job market is cooling, he said.
Source: https://www.cnn.com/2022/12/23/economy/pce-inflation-november/index.html
The Decline of New Orders for Manufacturing and Consumer Confidence During the November 1st Anomalous Core-Dependent Decline
The Commerce Department report showed that new orders for manufactured goods plummeted in November, their biggest drop since the start of the Pandemic.
New orders for non-defense aircraft and parts drove the decline, according to the report. Excluding transportation, new orders increase 0.2%.
“Core durable goods orders slowed but did not contract, reflecting growing unease about the economy,” Diane Swonk, chief economist for KPMG, tweeted Friday after the report’s release. The prelim reading for December indicates that manufacturing activity will contract further at the end of the year. The manufacturing sector is expected to experience a cold winter.
The final December reading of consumer sentiment came in at 59.7, slightly up from a preliminary measurement of 59.1 in November and a final reading of 56.8 in December.
The director of the Surveys of consumers said that consumers welcomed the recent easing of inflation. “While sentiment appears to have turned a corner from its all-time low from June, consumers have reserved judgment about whether the trends will continue.”
She said that the economy’s outlook is relatively weak. If incomes and labor markets are strong in the quarters to come, robust consumer spending will be sustainable.
Earlier this week, the Conference Board’s consumer confidence index – another measure of how consumers are feeling about the economy – landed at its highest measurement since April 2022.
Price Fluctuations During the First Two Years of The U.S. Pandemic: Consumer Demand Turns On After Covid-19
In the year through November, several major electronics got cheaper: Smartphone prices plunged 23.4%, TV prices dropped 17% and computers got 4.4% less expensive.
Earlier in the year, chains like Best Buy and Walmart stocked up on merchandise, preparing for supply chain shortages and what they projected to be robust consumer demand. They had plans but were derailed by inflation and consumer confidence.
In March, Delta president Glen Hauenstein called the spike in demand “unprecedented,” adding “I have never seen … demand turn on so quickly as it has after Omicron,” the Covid-19 variant that caused cases to spike last winter.
Many airlines reported record revenue in April, May and June thanks to high airfares and full planes as travelers returned in full force two years into the pandemic.
The war in Ukraine resulted in price fluctuations in the vegetable oil market, which resulted in margarine getting 47.4% pricier and butter getting 27% more expensive.
The price of groceries jumped 12.0% in the period with many consumers accepting the higher prices as thriftier alternatives to restaurant meals, which also grew more expensive but at a slower clip. Many restaurants increased menu prices in order to make up for higher input costs of food away from home.