>A separate report from the department’s Bureau of Labor Statistics noted that the big monthly hike in consumer prices translated into negative real wages for workers. Real average hourly earnings fell 0.5% for the month, as a 0.3% increase in average hourly earnings was more than negated by the CPI increase.<p>Wow, multiple stimulus checks, unemployment benefits and employees still have no bargaining power? What is going to happen to wages once all those people come back to work? Wages are not going to grow...<p>Okay, this is a clear case of stagflation. Meaning inflation isn't driven by wages, which is generally where a conventional inflation spiral begins. It is driven by the inability to increase production of certain goods, primarily cars and the inability to import goods. Cutting stimulus or raising interest rates won't make this go away because the underlying reason isn't monetary at all. The $50 billion subsidies for semiconductors do make sense in this context (even if they are a net loss from a tax perspective) and they address the problem at its root.
> Inflation has been escalating due to several factors, including supply-chain bottlenecks, extraordinarily high demand as the Covid-19 pandemic eases and year-over-year comparisons to a time when the economy was struggling to reopen in the early months of the crisis.<p>While this isn't surprising, it does feel that this is largely due to supply chains still dragging behind and those with jobs having more discretionary income due to not spending on other things. It also wouldn't surprise me if businesses are taking liberty with bumping prices to claw back a bit of what was lost last year, and to put pressure on demand as they struggle bringing workers back into retail focused positions.<p>I think if we're still seeing these y-o-y figures by the end of the year, then we've got something far more serious on our hands.
It's a scary top-line number, but it should be kept in mind that inflation last June was 0.6% [0], exceptionally low, as a side effect of the pandemic and quarantine.<p>So I think a lot of this supposed inflation is a transient effect of the statistics re-equilibrating after an extraordinary and unprecedented year of economic numbers in 2020.<p>[0] <a href="https://www.usinflationcalculator.com/inflation/current-inflation-rates/" rel="nofollow">https://www.usinflationcalculator.com/inflation/current-infl...</a>
One quick thought that just occurred to me is that we are pinning this "transitory" narrative on the idea that the situation will probably improve in the particular industries with currently exploding increases in inflation. E.g. used cars. But perhaps there will be a series of surprises where once the problem is solved in one industry, a new problem pops up in another industry. I.e. perhaps we get a series of rolling inflation explosions in different industries. E.g. I'm hearing a lot of macro investors going long on oil because they believe there is likely to be simultaneous increasing demand (China) and decreasing supply (ESG investors forcing oil companies to wind down). It seems like that could start to pick up steam once the used car situation is resolved.
<i>used car and truck prices leaped 10.5%, accounting for more than one-third of all the price index’s gains</i><p>I read just this morning[1] that used car prices are trending down. The leading indicator there is wholesale dealer auctions, and the the average price dropped 10% in June. So I think this aspect of inflation is starting to get itself under control.<p>[1]<a href="https://www.npr.org/2021/07/13/1014697915/inflation-is-still-high-used-car-prices-could-help-explain-what-happens-next" rel="nofollow">https://www.npr.org/2021/07/13/1014697915/inflation-is-still...</a>
As long as wages continue to rise, this is great news for the vast majority of Americans that are in debt. Congratulations, your mortgage and student loans aren’t as a big relative to your income.
My kids bank account just got taxed 5.4%. My pay went down 5.4%.<p>Maybe it's not quite exactly like that, but I genuinely feel bad for anyone with USD.
We should make a measure, as a form of protest, of Actual Revenue Per Median Household.<p>How it would work is we'd take your typical, family household in the median (not the average to be less skewed by extreme results). We'd take the income, then subtract Income Tax, the median Property Tax, the median Sales Tax paid on all purchases that month, the median State Income Taxes paid, the cost of Tax Preparation software, and basically all other essentially-necessary government expenditures for the median American family and their lifestyle.<p>The result would be a percentage of how much tax ultimately is paid to the government every month. Then, we adjust it every month for inflation caused by government expenditure, which has effects similar to a tax on your savings.<p>The result of this measure, I expect, would grab headlines everywhere. I expect the actual percentage of money paid to the government every month or lost from inflation would shock people.
obligatory reminder that prices didn't increase 5.4% in june as the headline might suggest, the 5.4% figure is only year-over-year. The BLS summary describes it better:<p>>In June, the Consumer Price Index for All Urban Consumers rose 0.9 percent on a seasonally adjusted basis; rising 5.4 percent over the last 12 months, not seasonally adjusted.