The federal government’s Bureau of Labor Statistics (BLS) released recent price inflation data last week, and in line with the report, price inflation through the month decelerated barely, coming in at the bottom year-over-year increase in twenty-three months. In keeping with the BLS, Consumer Price Index (CPI) inflation rose 5.0 percent 12 months over 12 months in March before seasonal adjustment. That’s down from February’s year-over-year increase of 6.0 percent, and February is the twenty-fifth month in a row with inflation above the Fed’s arbitrary 2 percent inflation goal. Price inflation has now been at or above 5 percent for twenty-three months in a row.
Meanwhile, month-over-month inflation rose 0.1 percent (seasonally adjusted) from February to March. That’s down from February’s month-over-month gain of 0.4 percent.
March’s year-over-year growth rate is down from June’s high of 9.1 percent, which was the very best price inflation rate since 1981. The BLS’s CPI inflation rate has now slowed from June’s high for nine months in a row.
Growth in CPI inflation has indeed slowed, and this reflects slowdowns in energy, gasoline, used cars and trucks. Food prices continues to rise at an alarming rate, but even there, price increases moderated somewhat with “food at home” slowing from a year-over-year increase of 10.2 percent in February to eight.4 percent in March. Prices in energy overall fell 6.4 percent, 12 months over 12 months, with gasoline dropping 17.4 percent over the identical period.
As of March, nonetheless, there remains to be no sign of price growth in shelter slowing down. In March, shelter prices increased by 8.2 percent 12 months over 12 months, which was the very best growth rate since June 1982. Month-over-month growth in shelter costs also remained amongst the very best we’ve seen because the Eighties.
Meanwhile, March was yet one more month of declining real wages, and was the twenty-fourth month in a row during which growth in average hourly earnings didn’t sustain with CPI growth. In keeping with recent BLS employment data released earlier this month, nominal wages grew with hourly earnings increasing 4.18 percent 12 months over 12 months in March. But with price inflation at 5 percent, real wages fell.
Inflation Is Not “Falling”
Predictably, the Biden administration has attempted to make use of this slowing in price growth as an excuse to assert inflation is “falling.” Last Friday’s press release on inflation from the White House reads:
Inflation has now fallen by 45% from its summer peak. Gas prices are down greater than $1.40 from the summer, and grocery prices fell within the month of March for the primary time since September 2020.
It is a very tortured spin on the statistics. The press release is worded in such a way as to suggest that prices are falling, but that is most actually not what is happening. Even with energy prices happening, 12 months over 12 months, increases in food and shelter prices are good enough to be sure that the associated fee of living continues to go up in real terms. This is very painful given 24 months of falling real wages.
Interestingly, even the mainstream media seems to have given up on attempting to send the message that price inflation is disappearing. NBC News, for instance, notes that “the associated fee of food and shelter remain stubbornly high” while also noting the “wage growth is slowing” and admitting deceleration in prices will occur “only very slowly.”
In other words, if you happen to’re an bizarre person hoping to get your grocery and rent bills under control, don’t expect much relief within the near future.
Furthermore, once we glance beyond food and energy—the 2 most volatile components of the CPI—it looks like much more price inflation is baked into the equation. This so-called “core inflation” rate of increase fell to five.6 percent in March, but that’s not down much from the measure’s 40-year high of 6.6 percent reached last September. Month-to-month increases also remain elevated with no sign of core-inflation growth turning negative.
This is probably going why even the Fed—which all the time is completely satisfied to assert it has the whole lot under control—refuses to declare victory against rising prices. On Wednesday, Recent York Fed President John Williams declared ““Inflation remains to be too high” prompting more predictions from Fed watchers that the Federal Open Market Committee (FOMC) will raise the goal rate of interest again on the committee’s next meeting. The Fed knows that price inflation is deeply unpopular with most of the people and that its credibility in predicting coming economic trends is lackluster at best. In any case, it was not until late 2021 that Fed officials would even admit the worth inflation was an issue in any respect. Up until then, Fed discuss inflation was all about how “transitory” it was. Before that, Fed officials has spent a complete decade talking about how inflation was too low. Even into 2021, Neel Kashkari was stating inflation was perfectly under control and there could be no hikes to the goal policy rate until 2023.
The administration has not been any more insightful. Janet Yellen, an economist turned politician who now inhabits the Treasury Secretary position, has consistently been fallacious similarly.
Members of the administration have also been forced to backtrack when attempting to persuade Congress of their expertise. On Tuesday, for instance, Biden advisor Jared Bernstein explained to Congress that “transitory” wasn’t really fallacious, it was just vague:
“We thought inflation was going to speed up and steadily cool down over time. Now that has turned out to be in reality the pattern that inflation has taken but ‘transitory’ was much too ambiguous an outline of that dynamic.”
Berstein insisted that “transitory” needs to be understood within the context of years, moderately than weeks or months.
Clearly, nonetheless, this shouldn’t be what “experts” like Bernstein, Kashkari, and Yellen meant after they said “transitory.” Transitory was clearly intended to mean “no big deal” or “don’t worry about it.” It has all the time been a political term, not a technical one. Now, after two years of falling wages, many are learning to doubt the experts’ narratives. Unfortunately, it’s too late to forestall a recession or ongoing malaise. After greater than a decade of runaway monetary inflation in the shape of quantitative easing, bailouts, and covid stimmies, the stage has been set for widespread bubbles, malinvestments, and economic distortions that may only be unwound with deflation, unemployment, and recession. The disease has all the time been the easy-money fueled boom. Price inflation is only a symptom.