The moment the government’s inflation number came out last Thursday, the stock market rocketed upward. President Joe Biden took a victory lap. It was less than expected! Inflation is cooling off!
Sounds wonderful. Except that prices rose in October by almost 8% year-over-year. That’s four times faster than the Federal Reserve Bank’s 2% target rate. And it marks the 20th consecutive month since inflation has been above the Fed’s target.
It also comes on top of previous record-level price hikes.
When prices started shooting up last year, the White House said it was no big deal because of the “base effect.” They said that prices seemed to be climbing rapidly in 2021 only because the COVID lockdowns had knocked prices down the year before. Since the base was low, the year-over-year comparisons made inflation seem higher than it really was.
“Over the next few months, as the base effects’ months drift further into the past, this distortionary characteristic of the price data should fade,” the White House said in a report in June 2021.
Except, that didn’t happen. Prices kept climbing even as those “base effect” months passed on by. And we are still seeing historically high price increases on top of historically high increases.
October’s year-over-year price spike of 7.7% is on top of the 6.2% increase in October 2021. In other words, prices last month were 14.4% higher than they were two years ago. Ask yourself, has your income increased by more than 14.4% over the past two years?
“While some may find solace in the falling CPI, the fact remains that many Americans are living paycheck to paycheck with little or no savings to speak of,” notes TIPP Insights, which is published by I&I’s polling partner.
The chart below shows just how painful Bidenflation has been, and still is. It shows the two-year increase in inflation for each month since 2014. You’ll notice, by the way, an uptick in the two-year inflation rate in October.
Another fact worth considering. The month-over-month CPI is accelerating. Prices didn’t increase in July or August, then went up 0.2% in September, and 0.4% in October.
By comparison, the average month-to-month increase in prices from 2012 through 2020 was … 0.1%.
Meanwhile, consumer confidence plunged in November, according to the University of Michigan’s index, largely on inflation fears.
And when Reuters polled economists, it found that their one-year expectation for inflation went up to 5.1% from 5% the month before.
Several economists say that we are far from out of the woods. According to Business Insider, Deutsche bank analyst Henry Allen warns that:
Inflation has remained high for a significant portion of this year, and while headline inflation is on the downtrend, ‘sticky’ prices – prices for goods and services that don’t change frequently – were still accelerating in September’s inflation report, and barely cooled by 0.03% percentage points in October. Together, those indicators are ‘seriously bad news,’ as they’re major omens for inflation expectations getting embedded in the economy.
Mohamed El-Erian, Allianz chief economic adviser, told Bloomberg that “We are slowly slipping into stagflation. We may not end up doing enough on the inflation side and then end up in a recession for Europe, near recession for the U.S. and for China.”
Is any of this worth celebrating? Will any of it improve dramatically so long as Biden pursues his spend-and-regulate campaign?
It is deeply unfortunate that voters weren’t able to put two and two together and realize that their current misery is the direct result of policies concocted by Biden and the Democrat-controlled Congress. Had they made that connection, the Red Wave would have been a Red Tsunami.
— Written by the I&I Editorial Board