Inflation was slightly negative in December 2022; that is, the Consumer Price Index (CPI) fell by 0.1% from November to December. To be sure, food prices remain too high, and housing/rent prices are still measuring very high, though both will probably head down later this year. Long term interest rates remain low (below 3.5% on the 10-Year U.S Treasury Bond as I type this), a key indicator that inflationary expectations are well controlled. The key point is: Price increases mostly stabilized over the last 6 months, as supply chains and the labor force got closer to normal and markets adjusted to the shock from Putin’s invasion of Ukraine.
The message is getting out. We’ve been talking about this at Daily Kos for months. Now, finally, the mainstream media is catching on. Prices did surge after the initial Covid shock, mostly because demand recovered faster than supply, and they jumped again after the Russian invasion, particularly for food and fossil fuels. But since last June, energy prices have mostly returned to pre-Covid baseline, while food prices remain elevated. When Ukraine wins back its farm land and resumes its pre-war agricultural exports, global food prices should fall back toward pre-Covid levels (although weather shocks, climate change, and local issues are always wild cards for food prices).
Here’s my favorite chart for trying to explain the impact of Covid, the supply-constrained economic recovery, and the Russian invasion on inflation. It shows that during the last 6 months, U.S. inflation rates have been pretty low — that is, prices rose during the Covid recovery and after the invasion, but they didn’t keep rising at those elevated rates. Instead, they leveled off.
There are lots of ways to measure inflation. It’s true that “core” prices however defined — usually without food and energy, sometimes without hard goods too (which is weird) — tend to lag. But for me at least, the inflation debate in the U.S. is now settled — it was mostly due to supply shocks, including labor supply, and it seems like we’re mostly over the worst of it.
Here’s the data I used for this graphic:
CPI for All Urban Consumers (CPI-U) |
|
|
|
|
|
|
|
|
|
Series Title |
All items in U.S. city average, all urban consumers, seasonally adjusted |
Series ID |
CUSR0000SA0 |
|
|
|
Seasonality |
Seasonally Adjusted |
|
|
Survey Name |
CPI for All Urban Consumers (CPI-U) |
|
Measure Data Type |
All items |
|
|
|
Area |
U.S. city average |
|
|
Item |
All items |
|
|
|
|
|
|
|
|
|
|
|
|
|
Year |
Period |
Label |
Observation Value |
1-Month % Change |
2020 |
M01 |
2020 Jan |
258.682 |
0.2 |
2020 |
M02 |
2020 Feb |
259.007 |
0.1 |
2020 |
M03 |
2020 Mar |
258.165 |
-0.3 |
2020 |
M04 |
2020 Apr |
256.094 |
-0.8 |
2020 |
M05 |
2020 May |
255.944 |
-0.1 |
2020 |
M06 |
2020 Jun |
257.217 |
0.5 |
2020 |
M07 |
2020 Jul |
258.543 |
0.5 |
2020 |
M08 |
2020 Aug |
259.580 |
0.4 |
2020 |
M09 |
2020 Sep |
260.190 |
0.2 |
2020 |
M10 |
2020 Oct |
260.352 |
0.1 |
2020 |
M11 |
2020 Nov |
260.721 |
0.1 |
2020 |
M12 |
2020 Dec |
261.564 |
0.3 |
2021 |
M01 |
2021 Jan |
262.200 |
0.2 |
2021 |
M02 |
2021 Feb |
263.346 |
0.4 |
2021 |
M03 |
2021 Mar |
265.028 |
0.6 |
2021 |
M04 |
2021 Apr |
266.727 |
0.6 |
2021 |
M05 |
2021 May |
268.599 |
0.7 |
2021 |
M06 |
2021 Jun |
270.955 |
0.9 |
2021 |
M07 |
2021 Jul |
272.184 |
0.5 |
2021 |
M08 |
2021 Aug |
273.092 |
0.3 |
2021 |
M09 |
2021 Sep |
274.214 |
0.4 |
2021 |
M10 |
2021 Oct |
276.590 |
0.9 |
2021 |
M11 |
2021 Nov |
278.524 |
0.7 |
2021 |
M12 |
2021 Dec |
280.126 |
0.6 |
2022 |
M01 |
2022 Jan |
281.933 |
0.6 |
2022 |
M02 |
2022 Feb |
284.182 |
0.8 |
2022 |
M03 |
2022 Mar |
287.708 |
1.2 |
2022 |
M04 |
2022 Apr |
288.663 |
0.3 |
2022 |
M05 |
2022 May |
291.474 |
1.0 |
2022 |
M06 |
2022 Jun |
295.328 |
1.3 |
2022 |
M07 |
2022 Jul |
295.271 |
0.0 |
2022 |
M08 |
2022 Aug |
295.620 |
0.1 |
2022 |
M09 |
2022 Sep |
296.761 |
0.4 |
2022 |
M10 |
2022 Oct |
298.062 |
0.4 |
2022 |
M11 |
2022 Nov |
298.349 |
0.1 |
2022 |
M12 |
2022 Dec |
298.112 |
-0.1 |