Real reason inflation becoming so worrisome: Getting in our heads…
One of the biggest problems with inflation right now is not the ships stuck at the Port of Los Angeles or the price of a pack of chicken thighs or even how difficult it is to nab a reasonably priced rental car — it’s what’s happening in Americans’ minds as their expectations shift about how much goods will cost going forward.
News this week that U.S. inflation is running at a 13-year high of 5.4 percent confirmed what many Americans already know as they juggle their budgets: Food, energy and shelter costs are all rising rapidly, adding to the strain Americans were already dealing with from the higher costs of hard-to-find goods such as cars, dishwashers and washing machines.
While policymakers debate how long higher prices will last — what “transitory” inflation means — the real question is how American families and businesses are going to react to this new era of uncomfortable inflation. What is the psychological impact of this jump in so many prices after years of low inflation? Are people’s behaviors going to shift?
Inflation in the economy today is different. Here are four charts that can explain why.
Atlanta Federal Reserve President Raphael Bostic said this past week his main concern is that the longer inflation remains high, the more likely it is that businesses and workers begin to believe that inflation will not come back down. Then they begin to alter their habits.
White House Defends: ‘Good Thing’…
“Well, that’s not exactly what the tweet said, nor the retweet of the original tweet, which is what we’re talking about here,” Psaki said in response to Tapper. “The fact is the unemployment rate is about half what it was a year ago. So a year ago, people were in their homes. Ten percent of people were unemployed. Gas prices were low because nobody was driving. People weren’t buying goods because they didn’t have jobs.
“Now more people have jobs,” Psaki said. “More people are buying goods. That’s increasing the demand. That’s a good thing. At the same time, we also know that the supply is low because we’re coming out of the pandemic and because a bunch of manufacturing sectors across the world have shut down because ports haven’t been functioning as they should be. These are all things we’re working through.”
Shoppers share photos of bare aisles in stores across country…
Truck Driver Shortage Only Making Supply Issues Worse…
Farmers Warn Of No Turkey Ahead Of Holidays…
Consumer sentiment slips to decade lows…
The numbers: The University of Michigan’s gauge of consumer sentiment fell to a preliminary October reading of 71.4 from a final September reading of 72.8. Economists polled by the Wall Street Journal expected a reading of 73.
Key details: A gauge of consumer’s views of current conditions fell to 77.9 in October from 80.1 in September, while an indicator of expectations slipped to 67.2 from 68.1 in September.
Household inflation expectations for the next 5 years fell slightly to 2.8%, above its pre-pandemic level of 2.3%. Expectations for 1-year inflation edged up 4.8% from 4.6% in September.
Big picture: While consumer sentiment remains above the roughly 10-year low seen in August, Americans remain wary of the impact of the ongoing COVID-19 pandemic and persistently high inflation.