US Inflation Rises Again: The End Of “Transitory”

We had another US official inflation release this past week.

It came in HOT.

The biggest shock might be that it was high and some people were actually still surprised.

In terms of details:

  • Month-on-month US CPI Inflation rose 0.9%, compared to 0.6% expected.

  • The annual measure rises to a stunning 6.2%. So average prices are now up over 6% versus a year ago.

  • It is official: US inflation is now the highest it has been in 30 years.

Here is the chart, including with Core CPI (excluding energy and food) and some other derivatives:

Source: BLS

A lot of endless debate around the whole transitory/not actually transitory concept is pretty asinine and not terribly useful.

What can be said rather simply is that a lot of the breezy arguments around why inflation:

Have been blown out of the water. You can see the "Meme of the Week" if you want a good progression of the coverage from those arguing against higher US inflation being a "thing."

The new talking head hot take is: "inflation is here but it is actually a good thing" which gets a double prize for being both foolish and condescending.

Put simply, it is far from clear as to whether it is a good thing for most Americans. For that to be true, you need wages to keep pace.

See the second Pebble story we are following, for more detail on this important topic.

For now, here is an update of our previous chart about what is contributing to this trend of strong inflation and why it is not "just" re-opening from the pandemic anymore:

But if are doing less debating around its existence, how should we think about this trend of rising inflation?

The most important questions now are:

  1. Is the inflation self sustaining?

  2. And are wages keeping up?

More broadly, if inflation is indeed "here to stay," what is the impact of this phenomenon that causes such heated debate and discussion?

This bring us to the new "American Divergence" we alluded to in our introduction.....


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