For several months, the American people have endured extensive inflation. In the beginning, we were told this inflation would be transitory and would subside sooner rather than later. Yet, as the months have passed, inflation has continued to increase, with no sign of it abating anytime soon.
In early February, the Consumer Price Index (CPI) report showed that inflation has hit 7.5 percent, the highest since 1982.
The current bout of inflation, as the latest CPI report attests, is wreaking havoc throughout the economy. Energy prices are up 27 percent over the past year. Gasoline has skyrocketed by 40 percent. New cars and trucks are up 12.2 percent. Used vehicles are up an astronomical 40 percent. Food prices at the grocery store have increased 7 percent. And, electricity prices have risen 10.7 percent.
As if that wasn’t enough bad news, the latest Producer Price Index (PPI) report shows inflationary pressures are unlikely to wane in the months ahead.
Unlike the CPI, which measures “the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services,” the PPI calculates “the average change over time in the selling prices received by domestic producers for their output. The prices included in the PPI are from the first commercial transaction for many products and some services.”
In other words, the CPI estimates how much prices have increased or decreased for consumers of goods and services whereas the PPI computes how much prices have changed for producers of goods and services.
In this way, the PPI is a good gauge of where inflation is heading while CPI presents inflation as a snapshot in time.
Unfortunately, the most-recent PPI report, released February 15, shows that inflation is likely to get worse before it gets better.
Consider. Overall, the PPI is up 9.7 percent over the past twelve months.
Specifically, “In January, the index for final demand services rose 0.7 percent, and prices for final demand goods moved up 1.3 percent. Prices for final demand less foods, energy, and trade services increased 0.9 percent in January 2022, the largest increase since rising 1.0 percent in January 2021. For the 12 months ended January 2022, the index for final demand less foods, energy, and trade services moved up 6.9 percent.”
Unsurprisingly, inflation has been a top concern for Americans over the past year. Yet, more and more, polls show that Americans are afraid inflation could be here to stay for quite a while.
According to a recent Gallup poll, 79 percent of Americans believe inflation will “go up a lot or a little” over the next six months. On the other hand, only 9 percent say inflation will “go down a lot or a little” over the same period. As Gallup writes, “In the past, Americans have always been more likely to say inflation will increase rather than decrease, but the current expectation is higher than usual -- in fact, it is the highest Gallup has measured in its trend.”
Perhaps some of this pessimism is due to the fact that the Biden administration does not appear all that concerned with inflation. To date, President Biden has done little, if anything, to quell inflation, while doing much to fuel the inflation fire.
In fact, when recently asked, “When can Americans expect some relief from this soaring inflation?” President Biden responded, “[I]t ought to be able to start to taper off as we go through this year.”
Sorry, Mr. President, but that is not good enough. The American people are struggling to make ends meet because of inflation caused by your reckless spending and misguided policies.
When Biden entered the White House, inflation was 1.4 percent. Since then, it has steadily increased, with no relief in sight. The American people will make their voices heard at the voting booth this fall, and it is highly likely inflation will be the definitive issue.
Chris Talgo (ctalgo@heartland.org) is senior editor at The Heartland Institute.