Inflation Seen Nearing New Four-Decade High in March - WSJ
S E E D E D C O N T E N T
U.S. inflation accelerated to 8.5% in March, the Labor Department said, a new four-decade high, as surging energy prices and higher food costs hit consumer.
High inflation is the downside of booming growth as the economy bounces back from the Covid-19 pandemic , creating a tough balancing act for the Fed as it tightens monetary policy to douse price gains without damping growth.
“We’re seeing strong inflation momentum across the board, both for goods and services,” Blerina Uruci, U.S. economist at T. Rowe Price Group Inc., said ahead of the report. Ms. Uruci said supply-chain constraints continue to push prices up, except for an easing of the costs for used cars.
“To me, this is a red flag,” said Ms. Uruci. “The other red flag is Russia’s invasion of Ukraine and the rise of Covid in China. Those pose risks that the so-called normalization of supply chains takes longer to materialize.”
Persistently higher prices come as the overall economy is strong and the labor market is tight. Employers added 431,000 jobs in March , the 11th consecutive month with gains above 400,000—the longest such stretch since records began in 1939.
High and rising inflation readings have cranked up pressure on the Fed to keep lifting interest rates this year to lower price pressures. The central bank raised its benchmark rate in March for the first time since 2018.
With job growth strong and inflation well above the Fed’s target, many Fed officials have indicated they could support raising rates by a half percentage point—instead of the traditional quarter point—at their next meeting in early May.
Energy prices soared in early March as Russia’s invasion of Ukraine pushed up crude-oil prices . Though gasoline prices have come down slightly in recent weeks, they remain near record highs .
Food inflation is also raising consumers’ grocery bills, pushed up by steady price increases for meat, eggs and citrus fruits. The Ukraine crisis is likely to add more pressure in coming months because of disruptions to global wheat and fertilizer production .
The burden of price rises could be triggering a consumer pullback, said Richard F. Moody, chief economist at Regions Financial Corp. Consumer spending decelerated in February, rising 0.2% from January , though it remains strong—up 13.7% from the same month in 2021.
“There’s an element of sticker shock when people go to fill up their tank or go to the grocery store. Lower- and middle-income households are already having to make choices about what to buy because they’re having to pay so much more for food and energy,” Mr. Moody said.
Alex Salwisz, 40 years old, is facing the rising costs of raising his five children. “The thing about having a big family is that each incremental increase is multiplied,” he said.
He said he has tried to substitute generic food products for name-brand foods as prices shot up —not always successfully. His children—ages 3 to 12—pushed back recently when he sneaked a bag of off-brand marshmallow cereal into a Lucky Charms box. “It didn’t pass,” said Mr. Salwisz, a program manager in information technology who lives in the Denver suburbs. “They had a little revolt, and more than one of them told me I shouldn’t do that again.”
Inflation has eroded their living standard in other ways, Mr. Salwisz said. The children have grumbled when the family crams uncomfortably into the smaller of two vans to save on gas. They have substituted a fast-food meal for the once-a-month sit-down dining experience. He and his wife, Amber Salwisz, are considering scrapping plans for summer camp because of a sharp increase in prices. One partial-day camp increased its price to $800 a week this summer from $500 the prior.
The bounceback in demand for travel , dining and other services as Covid-19 cases decreased is also driving price gains, and could gain momentum as summer holidays spur more recreational spending. A steady upswing in housing costs, which account for nearly one-third of the CPI, is also adding to inflationary pressure.
Solid demand for labor has shifted bargaining power toward workers , putting upward pressure on wages, which could feed into broader price gains. Annual wage growth was 6% in March, the fastest pace since records began in 1997, according to the Federal Reserve Bank of Atlanta’s wage tracker.
One indicator of building inflationary pressure moderated in March. Consumers’ median inflation expectation for three years from now fell to 3.7% last month, down from 3.8% February, according to a survey by the New York Fed released on Monday. However, the median expectation for inflation a year from now shot up to 6.6% from 6% in February.
Ron Mayland, an aerial photographer in Cedar Rapids, Iowa, has experienced the triple-whammy of high costs from energy, supply-chain disruptions and labor.
“If you think filling up a car is expensive, try an airplane,” he said, adding that he puts hundreds of dollars’ worth of fuel in the tank every day. When he needed to buy small parts to repair one of his plane’s oil-pressure systems, it took him two or three days to find the materials and they cost twice as much as he expected.
“I’m still getting sticker shock when pulling up to the pump, and then for the parts and the repairs—that’s where it’s really hitting me,” he said. “It seems like the numbers are just getting bigger.”
The Fed was late to recognize it and is now playing catch up. Some experts are predicting a recession next year.
That's going to be a very tough sell.
Exactly, that shutdown will make the difference this Nov.
Especially where there is nothing to back it up.
Some are predicting it this year.
Gas prices started their march when the green weenie walked through the door - never mind blaming Ukraine. When he’s done, there’ll still be expensive fuel with no reserve.
And he walked through that door with a woke script and an armful of EO's crafted by his radical handlers.
And those EO's eliminates any chance that they can place blame on any other Administration except the current one.
Yup, the devil is in those details. They own it.
They own it but will still try blaming everybody else. Remember when this all started it was "Transitory" then there was some other excuse, then they were actually dumb enough to blame Putin's invasion of Ukraine.
By August they will have a solid plan on how to blame it on Trump and will try to carry that into November. They tried to blame it on Trump earlier but that failed so they shifted to Putin but they'll be back on Trump soon enough. Just can't help themselves, gotta hate the orange man...
They can't even fool some of the people some of the time.
It's hard to blame somebody else when they come into this administration with a stack of EOs.
It is funny when their own people don't buy the BS.
"J.P. Morgan Chase CEO Jamie Dimon released his annual must-read letter to shareholders on Thursday, and bashing socialism, defended stock buybacks and talked about some potentially dangerous days ahead.
“When governments control companies, economic assets (companies, lenders and so on) over time are used to further political interests – leading to inefficient companies and markets, enormous favoritism and corruption,” Dimon wrote in the letter, which was released along with the bank’s 2018 annual report.
“Socialism inevitably produces stagnation, corruption and often worse – such as authoritarian government officials who often have an increasing ability to interfere with both the economy and individual lives – which they frequently do to maintain power. This would be as much a disaster for our country as it has been in the other places it’s been tried,” he added."
.
Jamie Dimon is your idea of a socially responsible business leader? LOL. His opinion of "socialism" isnt worth the paper it is printed on.
I'm more inclined to go by Jamie Dimon and the experts at Goldman Sachs than the fool who enacted one $ Trillion Dollar spending bill after another. I'm sure you wouldn't doubt Larry Summer's calculations? He called it right almost immediately:
"Amid a resurgent pandemic, there are shortages at the grocery store and the highest inflation in almost 40 years. So who better to sum up 2021 and forecast 2022 than Larry Summers, whose contrarian warnings about inflation have, at least at this point, largely proven accurate. On this special holiday edition of Stephanomics, the former U.S. Treasury Secretary shares with host Stephanie Flanders how he arrived at his prediction that inflation would run higher than most everyone else expected, and why he fears "we are already reaching a point where it will be challenging to reduce inflation without giving rise to recession.” Summers, a Harvard University professor and paid Bloomberg contributor, also explains why he thinks "running the economy hot" is unlikely to help U.S. workers get a larger slice of the economic pie. If inflation isn't enough to further dampen your spirits, Summers also tells Flanders why the nation may see a double whammy of recession and "secular stagnation," an unappealing mix of weak growth and persistently low interest rates."
We have both oil company executives and consumer product company executives admitting that they have raised prices to "maximize profits" during this inflation crisis, yet you insist on placing all the blame on Biden. You must want Trump back, lol.
It's corporate greed and it's Putin and it's the pandemic and let's not forget it's Din, Din, Gunga Din!
Who would you consider a socially responsible business leader?
anybody.
You're more inclined to go by Jamie Dimon and the experts at GS than anybody else. Mostly because they know WTF they're talking about.
I'd say so.
When governments control companies, economic assets (companies, lenders and so on) over time are used to further political interests – leading to inefficient companies and markets, enormous favoritism and corruption
Very well put.
Economics 101.
You dont think Goldman Sachs has benefited from enormous favoritism and corruption? Yikes.
How about Larry Summers?
Rescue and then fine and then donate the money to left wing causes.
As I always say, the ideologues are far worse than the corrupt.
Ya! Corruption is so much better than ideologues.
Aren't you and all of your readers ideologues???
There is no need to ask.
I know I'll never get an answer to that question.
Did I say that?
Just look at Dodd-frank to see Goldman use the federal government to its advantage.
No.
Who else is a 'good' capitalist going to bash? This skipping record is all so tiresome.
Just ask those who fled Cuba or Venezuela.
"Stock futures climbed and a selloff in government bonds reversed after inflation data showed that consumer prices accelerated to a new four-decade high in March.
Futures for the S&P 500 climbed 1.1%, shaking off losses notched earlier Tuesday. Contracts for Dow Jones Industrial Average added 0.6%, while those for the technology-heavy Nasdaq-100 surged 1.9%. On Monday, major indexes retreated , with the benchmark S&P 500 losing 1.7%.
The yield on the benchmark 10-year Treasury note fell to 2.712% Tuesday, having risen earlier to its highest level since 2018. On Monday, the yield closed at 2.779%. Bond yields fall when bond prices rise.
The market turnaround came after Labor Department data showed that the consumer-price index accelerated to 8.5% in March from a year before, and was higher than some economists had forecast. The data outpaced February’s 7.9% reading and marked multidecade high."
It didn't hold, though. All three major indices were in the red by the close, and the bonds were back down.
Yup, something happened. The Fed announced they were going to get aggressive with interest rates. That means the market will be taking a big hit.