Over the past year and a half, inflation has moved from being transitory, to being possibly good for average Americans and bad for the rich… and now generally seen as bad and possibly long term or seeing a period of stagflation.
Most of that depends on perspective, as someone like me considers inflation to be mostly bad.
The problem seems to be the idea that prices will reach a level that will crimp the consumer’s zeal for purchasing and then creating a recession. Are we there yet?
Probably not, as bountiful stimulus checks offset much of the inflationary impact of the past year. By stimulus checks, I am referring to the Spring 2021 $1,400 checks, which coincided with the mass introduction of covid vaccines and a general feeling of the bad times being in the rear-view mirror.
Now the consumer is using more and more debt to continue their spending habits, just as interest rates are ticking up. The assumption being to buy stuff now, before the price escalates. Naturally the expectation is the increase in prices will outweigh the added interest burden.
Borrowing from the bank might make that true, but credit cards are a loser, in my opinion. I can see no scenario where inflation would outpace credit card rates. Yet, this is the area that is now being expanded by card holders. How much longer can that continue?
As for general inflation, I would expect food to continue the rise, as climate, wars, fertilizer costs, etc. will continue for at least another year. Food costs are approximately 14% of average household spending. THAT average household total spending annually is now running about $47,000. If you are spending less than that, then quite likely your food costs are a much higher percentage of expenses.
Energy makes up about 8% of those expenses, although gasoline runs about half that figure. I can not imagine much relief in that area before fall. Currently the short-term prognosis is average U.S. retail to rise to $4.50 per gallon, which is slightly above current retail. We are just now entering the “summer” driving season, so I can only expect this to go higher.
What about the rest? I cannot imagine a situation where the current inflation is not passed onto the broader economy. Inflation may slow in these areas, but certainly will not reverse any time soon.
Then there is the beginning of shortages, which was China’s lockdowns of 2020. We seem to forget this period of hoarding as there were shortages of vital components for our industries. China has been battling lockdowns over the past couple of months… that are more widespread than 2020. This is a rather large variable, as they come out of lockdown and all those ships start moving to ports elsewhere.
I have an uneasy feeling about many things but need to just chill for a while.
