Post-Pandemic Rate Of Inflation Declines For The Fifth Straight Month After Peaking In June

Update to The Inflation Rate Is Gradually Coming Down From ‘Peak Inflation’ In June (excerpt):

The U.S. hit post-pandemic “peak inflation” in June 2022, and the rate of inflation has been steadily coming down on the backend of the inflation peak. If this steady decline continues at the present rate, by this time next year the rate of inflation will have declined close to the FED’s target rate of inflation of 2%, barring any new shocks to the global economy.

The Associated Press reports, A slowdown in US inflation eases some pressure on households:

Inflation in the United States slowed again last month in the latest sign that price increases are cooling despite the pressures they continue to inflict on American households.

Consumer prices rose 7.1% in November from a year ago, the government said Tuesday. That was down sharply from 7.7% in October and [from the] peak of 9.1% in June. It was the fifth straight decline.

Measured from month to month, which gives a more up-to-date snapshot, the consumer price index inched up just 0.1%. And so-called core inflation, which excludes volatile food and energy costs and which the Federal Reserve tracks closely, slowed to 6% compared with a year earlier. From October to November, core prices rose 0.2% — the mildest increase since August 2021.

All told, the latest figures provided the strongest evidence to date that inflation in the United States is steadily slowing from the price acceleration that first struck about 18 months ago and reached a four-decade high earlier this year.

Gas prices have tumbled from their summer peak. The costs of used cars, health care, airline fares and hotel rooms also dropped in November. So did furniture and electricity prices. Housing costs jumped, though much of that data doesn’t yet reflect real-time measures that show declines in home prices and apartment rents.

Grocery prices remain a trouble spot. They surged 0.5% from October to November and are up 12% compared with a year ago.

See, New Research from Groundwork Collaborative Shows Link Between Price Hikes, Monopoly, and Corporate Greed:

[As] you cover this issue, it’s important to understand the real culprit behind rising prices at the checkout line: corporate power.

“The more sway mega corporations have over our economy, the more power they have to gouge customers, squeeze Main Street, and exploit workers,” said Rakeen Mabud, chief economist at Groundwork Collaborative. “Addressing this crisis means recognizing these price increases for what they are: the result of deeply entrenched concentrated corporate power that has systematically stripped down supply chains and created room for pandemic profiteers as well as long-standing underinvestment in our economy.”

New research from Groundwork Collaborative shows how concentrated corporate power is squeezing small businesses and stymieing our collective economic health: 

• Food prices overall have increased 4.6% since September 2020, with meats, poultry, fish, and eggs accounting for the highest increase at 10.5%. 
• Just four meat processing conglomerates control more than 80% of the beef industry and more than 60% of the pork industry. This enables them to dictate prices that both flatten returns for farmers and ranchers and inflate prices for consumers at the meat counter. As a result, consumers have seen a 12% increase in the cost of beef and a nearly 10% increase in the cost of pork over the last year. Meanwhile, the four major meat processors doled out billions of dollars to their shareholders in dividends and bought back millions of dollars of their own stocks.
• State governments, including Minnesota, Texas, California, and New York have sued egg producers and distributors for illegally raising the price of eggs during the pandemic, which has risen 9.9% since August 2020. As one lawsuit put it, jacking up egg prices is allowing these companies, including some of the largest producers and wholesale distributors of eggs, to “profit from the misery of millions.” 
• Kroger, a grocery mega-chain, spent the summer of 2021 gloating that “a little bit of inflation is always good in our business” before citing inflation to justify price hikes. Kroger publicly acknowledged that they could get away with increasing prices on consumers as long as prices didn’t rise by more than 3 or 4%.
• Charging consumers more for supermarket staples has lined the pockets of Kroger executives and shareholders, even as median worker pay decreased by 8% in 2020. That same year, the Kroger CEO earned 909 times what the median worker earned. 
• While the company was publicly calling their workers heroes, they were simultaneously cutting essential hazardpay for employees during a global pandemic. Meanwhile, the company spent $1.498 billion on stock buybacks between April 2020 and July 2021 to enrich its shareholders.

Those price spikes have left many Americans struggling to afford food. In Phoenix, there are long lines at St. Mary’s Food Bank, which provided Thanksgiving meals to a record 19,000 families across Arizona last month.

“They’re eating snacks and granola all day long,” Rosa Davila, an unemployed single mother, said of her three teenagers while waiting in line for a package Tuesday. “The food bank really resolves things for us.”

Alma Quintera, also waiting in her car, said that even with her husband working full time as a house painter, they have to visit the food bank two or three times a month to adequately feed their three school-age children.

“The high prices have really affected us — the rent, the bills and especially the food,” she said.

Jerry Brown, a spokesman for St. Mary’s, said the food bank’s main Phoenix location last week distributed packages to 4,717 families, up 63% from the same week a year ago.

Economists say the latest inflation figures, though, suggest the likelihood of some relief in the coming months.

“Inflation was terrible in 2022, but the outlook for 2023 is much better,” said Bill Adams, chief economist for Comerica Bank. “Supply chains are working better, business inventories are higher, ending most of the shortages that fueled inflation in 2020.”

President Joe Biden called the inflation report “welcome news for families across the country” and noted that lower auto and toy prices should benefit holiday shoppers. Still, Biden acknowledged that inflation might not return to “normal levels” until the end of next year.

Remarks by President Biden on the Administration’s Efforts to Tackle Inflation (excerpt):

This morning, we received some welcome news, in my view — and I think the view of most economists — on the economic front, news that provides a reason for some optimism for the holiday season and, I would argue, for the year ahead. And we learned last month’s inflation rate came down, down more than experts expected.

In a world where inflation is rising at double digits in many major economies around the world, inflation is coming down in America.

In fact, this new report is the fifth month in a row where annual inflation has fallen in the United States. Inflation outside of food and energy, a key measure of — that economists use, also fell.

Make no mistake — prices are still too high. We have a lot more work to do. But things are getting better, headed in the right direction.

Most Americans can see the progress driving down the street, finding relief at the pump as gas prices fall. Gas prices are now lower than they were a year ago, and half the gas stations selling gas at — are selling gas at $3.09 or less. The most common price for gas stations across the country is $2.99.

The decline in gas price is giving consumers a break they need, helping them keep our economy growing.

Today’s report contains another piece of good news: Food inflation has slowed last month, providing much-needed relief for millions of families at the grocery store.

This is welcome news for families across the country as they get ready for the holiday celebrations and for family dinners.

It’s also important that we put today’s news in a broader context.

When I took office, we inherited a nation with a pandemic raging and an economy that was reeling. We acted quickly and boldly to vaccinate the country and to put in place a — a new economic strategy — a strategy built on an economy that was based on “from the bottom up and the middle out.”

Now, 21 months later, we can see how our — our economic plan is working.

We’ve added, every single month — every single month of my presidency, we’ve added jobs — a total of 10,500,000 new jobs; 750,000 of them are manufacturing jobs.

[T]he unemployment rate is down from 6.4 percent when I was sworn in. It’s now 3.7 percent, near a 50-year low.

We’ve done all of this while lowering the federal deficit in the two years we’ve been in office: $1.7 trillion. Let me say that again: $1.7 trillion we’ve lowered the federal debt. No administration has ever cut the deficit that much. And now inflation is coming down as well.

Prices of things like televisions and toys are going down, and it’s good news for the holiday season. Used car prices fell for the fifth month in a row. New car prices didn’t go up this month. That savings is critical to so many families. It gives them just a little bit of breathing room for the holiday season.

And all of this means that, for the last several months, wages have gone up more than prices have gone up. Wages have gone up more than prices have gone up.

And I want to be clear: It is going to take time to get inflation back to normal levels as we make the transition to a more stable and steady growth.

But we could see setbacks along the way as well. We shouldn’t take anything for granted. But what is clear is that my economic plan is working, and we’re just getting started.

The AP continues:

One sign of progress in November’s figures was that prices for new cars didn’t budge from October. On average, new cars are still 7.2% costlier than they were a year ago. But that’s down from a 13.2% year-over-year jump in April, which was the highest on records dating to 1953.

The decline in new-car prices helps illustrate how supply chain snarls, which have unwound for most goods, are also easing for semiconductors and other key automotive parts. Economists say this should enable automakers to boost production and give buyers an expanded supply of vehicles.

It also suggests that the Fed’s aggressive interest rate hikes, which have made it more expensive to borrow for homes, cars and on credit cards, have begun to slow demand and limit the ability of auto dealers to charge more.

Wall Street welcomed the better-than-expected inflation data as providing further support for the Fed to slow and potentially pause its rate hikes by early next year.

On Wednesday, the Fed is widely expected to raise its benchmark rate by a half-point, its seventh hike this year. The move would follow four three-quarter-point hikes in a row. A half-point increase would put the Fed’s key short-term rate in a range of 4.25% to 4.5%, the highest in 15 years.

The increase will further raise loan rates for consumers and businesses. Economists have warned that in continuing to tighten credit to fight inflation, the Fed is likely to cause a recession next year.

“There’s growing evidence that the worst of the inflation scare may be in the rearview mirror,” said Jim Baird, an economist at Plante Moran Financial Advisers. “On the horizon is the potential for a recession — the next hazard in the road that policymakers will need to navigate the economy around or potentially through.”

Fed Chair Jerome Powell has said he is tracking price trends in three separate categories to best understand the likely path of inflation: Goods, excluding volatile food and energy costs; housing, which includes rents and the cost of homeownership; and services excluding housing, such as auto insurance, pet services and education.

In a speech two weeks ago in Washington, Powell noted that there had been some progress in easing inflation in goods and housing but not so in most services. Some of those trends extended into last month’s data, with goods prices, excluding food and energy, falling 0.5% from October to November, the second straight monthly drop.

Housing costs [A lagging indicator because of periodic leases], which make up nearly a third of the consumer price index, are still rising. But real-time measures of apartment rents and home prices are starting to drop after having posted sizzling price acceleration at the height of the pandemic. Powell said those declines will likely emerge in government data next year and should help reduce overall inflation.

As a result, Powell’s biggest focus has been on services, which he said are likely to stay persistently high. In part, that’s because sharp increases in wages are becoming a key contributor to inflation. [Old school economic thinking.] Services companies, like hotels and restaurants, are particularly labor-intensive. And with average wages growing at a brisk 5%-6% a year, price pressures keep building in that sector of the economy.

Services businesses tend to pass on some of their higher labor costs to their customers by charging more, thereby perpetuating inflation. Higher pay also fuels more consumer spending, which allows companies to raise prices.

Note: There is no evidence of a 1970’s wage-price spiral in the economy. Don’t blame low wage workers for finally getting  a pay raise for inflation which is driven by corporate greed aka “greedflation.” Labor costs point to corporate profit as main inflation driver:

The continued drop in labor costs has economists pointing to private sector profits as a main driver of inflation, undercutting arguments from the Federal Reserve regarding its plan to bring down consumer prices that remain around 40-year highs.

Unit labor costs, which are measured by the Labor Department to determine how much businesses are paying for workers to produce their goods and services, have been getting outpaced by profits over several quarters, leading economists to call out a trend.

Paul Donovan, an economist with Swiss Bank UBS, wrote in a note to investors saying that Wednesday’s labor cost numbers showed again that corporate profits are rising faster than labor costs.

“Today’s inflation is more about margin expansion than labor costs,” he wrote. Earlier this week, Donavan said the slowing labor cost growth underscored “how little of the current inflation is labor related.”

Prices for many services kept rising in November. Dental care jumped 1.1% just from October and is 6.4% costlier than it was a year ago. Restaurant prices rose 0.5%. They’re 8.5% higher than a year earlier.

Auto insurance prices jumped 0.9% in November and are 13.4% more expensive than a year earlier. The average cost of an auto repair rose 1.3% last month and 11.7% over the past year.

Yet even in services, excluding housing, there were some signs of cooling prices. The cost of car rentals, airline fares and hotel prices, for example, all dropped in November.

Overall, a measure that approximates services excluding rent was unchanged in November, after having dipped 0.1% in October. That measure had soared 1.1% in both April and June this year.

As I have explained previously, the post-pandemic economy most closely parallels the post-Word War II economy, when the world was transitioning from a war economy back to a consumer goods economy, with years of pent-up consumer demand. There were shortages of everything because of supply-chains disrupted by the war and the amount of time that it takes to transition production lines from tanks and bombers back to automobiles, for example. Inflation was high for several years as pent-up consumer demand far outpaced the ability of producers to meet this consumer demand. But inflation came down and the American economy boomed as these difficulties in producing goods were eventually resolved and supply caught up to consumer demand.

Patience is a virtue. Be patient, the economy is recovering from the global pandemic and the Russo-Ukraine War, which continues. Inflation is coming down and wages are going up in the new U.S. economy. We are much better off than the rest of the world. So count your blessings.