“Demand is coming back very rapidly, and businesses are normalizing prices in the sense that they are making up for declines…”
Inflation continues to grow as the economy opens up. June’s consumer price index (CPI) hit 0.9% after going up 0.6% in May.
The CPI from June 2020 to July 2021 went up 5.4%, which is the largest increase in a 12-month period since August 2008.
The CPI “measures a basket of goods as well as energy and housing costs.” In other words, it encompasses everything. All goods.
The CPI not counting food and energy increased by 4.5% in that same time period.
The numbers we should look at do not count food and energy. I know I mention that in every post, but it is important. Food and energy are too fluid to count.
Used cars and trucks, new cars, airline fares, and apparel increased in June. Medical care declined.
- Used cars and trucks: 10.5% increase from May, which is the largest increase ever since the government started tracking the index.
- New vehicles: 2% increase from May. Largest one-month increase since May 1981
- Airline fares: 2.7% increase from May
- Apparel: 0.7% increase from May
The healthcare index is important because healthcare and housing prices have skyrocketed in the last 20 years.
The index decreased again:
The medical care index declined 0.1 percent in June, as it did in May. Medical care component indexes were mixed. The index for prescription drugs declined 0.2 percent in June after falling 0.3 percent in May. The hospital services index increased 0.2 percent, while the physicians’ services index rose 0.3 percent in June.
Higher prices mean more demand, but also supply shortages and higher shipping costs:
Consumers are seeing prices rise for numerous reasons, as the U.S. economic recovery picks up. Richard F. Moody, chief economist at Regions Financial Corp., said the main driver of June inflation was booming demand that outpaced the ability of businesses to keep up. Another factor, he said, was the recovery in prices for air travel, hotels, rental cars, entertainment and recreation—all services hit hard by the Covid-19 pandemic.
“Demand is coming back very rapidly, and businesses are normalizing prices in the sense that they are making up for declines” earlier in the pandemic, he said.
Supply shortages and higher shipping costs also continue to drive rapid increases in goods inflation. Prices of goods, excluding food and energy, saw the two biggest monthly increases on record in April and May, Mr. Moody said.
Rising prices reflect robust consumer demand boosted by widespread vaccinations, the ending of many business restrictions, trillions of dollars in federal pandemic relief and ample household savings. Stronger demand also has pushed employers to seek more workers and pay higher wages, as they struggle to hire.
I wonder if higher prices will force people to give up the government dough and get a job. We’ve seen unemployment rolls go down in states that decided to end the COVID federal funds. I cannot imagine people can afford these high prices with those checks.
The economy has plenty of jobs. It’s time to get back to work and spend! Remember, the consumers drive the market and economy.DONATE
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