The Producer Price Index (PPI) fell by 0.5 percent in December, and, more importantly, producer prices haven’t risen at all over the last six months. Today’s PPI report follows last week’s Consumer Price Index (CPI) report, which showed a 0.1 percent fall in December and an annualized increase of only 1.8 percent over the last six months, below the Fed’s target of 2 percent. Similar inflation data called the Price Index for Personal Consumption Expenditures (PCE) will be released on January 27.
Retail sales also fell by 1.1 percent in December, following a revised 1.0 percent decline in November, indicating (probably) the beginnings of at least a modest recession. Republican brinksmanship over the Debt Ceiling could easily push the economy into a much more dramatic recession. At this point, the Fed’s determination to keep raising interest rates to “fight inflation” and “cool the economy” is just goofy — economists and pundits are finally realizing what we at Daily Kos have known for months: inflation has been below target for the last half year and the economy has cooled substantially. Stop raising interest rates and risking an unnecessarily bad recession already!
The main culprit in my mind is the media’s lazy reporting: characterizing monthly price increases as over the last 12 months instead of over the most recent month or two or three.
I made the following chart, which I submitted as a part of an op-ed to a major publication (I’m not holding my breath) to illustrate how prices receded after Covid, jumped with the economic recovery, surged again during the Russian invasion, then then flattened out over the last 6 months. Note, to make the chart more readable, I took out the negative bars from March-May 2020 and again in December 2022. That way it’s easier to read the scaling, with the monthly percent increases on the left scale and the 12-month trailing increase on the right scale.
It’s not rocket science. The annual 12 month figures on inflation still contain the Putin war surge during that first six months of 2022. That is past inflation, sure, but it’s not our current inflation situation or outlook at all. Inflation has been low now for a half a year!
Six months worth of low inflation is enough for me. Inflation is dead. Please Fed governors — let go already!