For months after taking office, members of the Biden administration claimed that inflationary pressures were “transitory” and due in large part to supply chain disruptions linked to the COVID-19 pandemic.
But a new cost analysis by one economic expert reveals a much deeper issue: Not only is inflation not transitory, but it is also rising and prices for a basket of consumer goods aren’t expected to fall again anytime soon.
The Labor Department’s Consumer Price Index showed that in August, inflation was running around 5.3 percent year-over-year, which was down from July’s 5.4 percent — a figure that matches June’s inflation rate compared to June 2020.
In sum, the inflationary figures mark the “biggest 12-month rise since August 2008, just before the financial crisis sent the US into the worst recession it had seen since the Great Depression,” the New York Post reported.
And the steep price increases are hitting American families in their pocketbooks even as wages have not kept up with additional costs, essentially acting as an additional tax on middle-income earners who are still struggling to recover from the pandemic amid ongoing supply shortages and a massive amount of government spending.
A new Moody’s Analytics study by Mark Zandi, the firm’s chief economist, found that for households earning the median U.S. annual income of roughly $70,000, the rates of inflation mean they are spending about $175 more a month for food, fuel, and housing.
“That’s the equivalent of a full grocery, electric, or cellphone bill,” Zandi told The Post.
“The number of US households that report that it is ‘very difficult’ to pay for their usual expenses has increased by 8 percent since early August, to 26.5 million, according to the Oct. 6 Census Bureau’s Household Pulse Survey,” The Post added.
The current rates of inflation, not at all transitory, are at 30-year highs, the outlet noted.
There are a number of reasons for the price increases other than the Biden administration’s fiscal, monetary, and energy policies.
A dearth of truck drivers, many of whom left the industry during pandemic-related shutdowns last year, is also exacerbating the supply chain disruptions, as are shortages of other transport industry workers up and down the line, especially at ports where dozens of cargo ships remain anchored in harbors off Los Angeles and New York City because they can’t be offloaded.
And because of the confluence of issues, “price increases will continue until the middle of next year,” predicted Gordon Haskett analyst Chuck Grom, citing an announcement by PepsiCo that the company would be raising its prices again next year.
Economists are concerned that the situation won’t right itself anytime soon — if at all — if for no other reason than the inflationary pressures are global.
“It’s this combination of things that’s beginning to get very worrying,” Abdolreza Abbassian, senior economist at the UN’s Food and Agriculture Organization, told Bloomberg News. “It’s not just the isolated food-price numbers, but all of them together. I don’t think anyone two or three months ago was expecting the energy prices to get this strong.”
The surge in energy prices is also taking a bite out of consumers’ earnings; gas prices in the U.S. have risen about a dollar a gallon since this time last year, on average.
“It will be quite a jittery market for some time,” Abbassian predicted, noting that higher energy costs are directly responsible for higher food production expenses.
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