Remember, disinflation is not deflation, it is simply a time when inflation has reduced over the short term, though, there is a chance of deflation when it drops near zero
Inflation is cooling, but the price hikes aren’t done
In 2021, when the price of organic cotton and other raw materials spiked, the family that runs White Lotus Home, a New Jersey-based sustainable bedding company, hoped the 20% to 25% jumps were merely momentary and opted to absorb most of the costs.
But earlier this month, Marlon Pando, White Lotus Home’s chief executive, emailed customers to explain that the 42-year-old company could no longer afford to do so, and that prices would go up in 2024.
In Boulder, Colorado, restaurateur Tony Hessel spends his weekends poring over spreadsheets he’s built to wrangle ingredient costs that have been consistently erratic. While he has been able to lower prices on some dishes, he’s had no choice but to raise others.
Inflation in the United States has unquestionably cooled after hitting 40-year highs last year. However, recent inflation gauges, the actions of reticent small businesses like these, and the broad-based announced price hikes by large entities like Chipotle and Disney, reinforce what Federal Reserve Chair Jerome Powell and others have repeated for months: Disinflation will be bumpy.
However, the longer that process drags on, consumers’ patience — and, in some cases, their pocketbooks — are wearing increasingly thin.
“When we look ahead, what we’re likely to see in the economy is slower demand,” said Lydia Boussour, EY-Parthenon’s senior economist. “And that means for businesses, the ability to pass on higher prices and higher costs to the consumer is going to be limited.”
That lower demand is already there, especially with big ticket items, even some somewhat essential like automobiles. Further, many items are gone. Lots of products went away due to COVID and/or inflation, and are not coming back, like those low cost alternatives to things you’d get at the grocery store, because they just cannot afford to have them
Prices in the United States, by and large, are still going up — just not as much as they were last year.
During the 12 months that ended in September, the Consumer Price Index rose 3.7%, versus the 41-year high of 9.1% in June 2022. Other key inflation gauges, the more comprehensive Personal Consumption Expenditures price index and the wholesale-focused Producer Price Index, have moderated as well.
However, in recent months, their descents have been choppier. A spike in gas prices and other components such as persistently high shelter costs have kept inflation elevated.
Remember, that 3.7% is on top of the previous inflation hikes. And they were going up in 2021. Basically, the entire Biden years are ones of high inflation. Interestingly, the Credentialed Media has been feeding us the line about inflation cooling for most of this year, yet, prices continue to go up. Things that could swing down do not. The cost for used cars is still way too high. Home and apartment prices are out of control. There could be slight shifts downward in some goods, mostly foods, as the price of gas fluctuates, but, not much, and not for long, as gas remains much higher.
When digging into the numbers, the picture does look rosier, economists say, noting that the monthly inflation gains are in line with the Fed’s desired 2% inflation target. (The latest reading of the Fed’s preferred inflation gauge, the PCE index that strips out energy and food, will be released on Friday).
I’m pretty sure that 3.7% is almost double 2%.
Read: Bidenconomy: CNN Notes That Inflation Is Not Done, But, Disinflation Could Be Worse »