“In the December inflation report, you are going to see disinflation in energy prices,” Daco said. According to A.A.A., the average price of gasoline nationwide is $3.34 a gallon, compared with $3.42 a month ago. Since the end of October, the price of crude oil has dropped by more than ten dollars a barrel on world markets, which is now resulting in slightly lower prices at the pump. “But, on net, you will see substantially lower inflation.”Įchoing Biden’s point about gas prices, Daco also predicted that the headline inflation rate would start to fall as early as this month. ![]() “If you look out to next year, twelve months from now, you are likely going to see much lower goods-price inflation and somewhat higher services-price inflation,” Daco said. By contrast, the price of non-energy services increased by 0.4 per cent, the same increase as in the previous month. Energy prices rose by 3.5 per cent, with the biggest increases coming in gasoline and fuel oil. On a seasonally adjusted basis, the prices of new vehicles increased by 1.1 per cent between October and November, and the cost of used vehicles rose 2.5 per cent. economist, who said the report showed the same trends that have been evident for months: strong upward pressure on the price of physical goods, many of which depend on far-flung supply chains, and significant but smaller price rises for services, which have been less affected by pandemic-related disruptions. After Friday’s report was released, I spoke with Gregory Daco, the firm’s chief U.S. That forecaster is the consulting firm Oxford Economics. At least one economic forecaster believes that by next November-the month of the midterms-the headline inflation rate will have fallen to below two per cent. However, Friday’s inflation report shows that the data are broadly consistent with Powell’s prior argument that dynamics related to the pandemic and the resulting global supply-chain problems are driving most of the surge in prices, and that inflation should fall back in 2022 if those issues get resolved. The Fed chairman, Jerome Powell, saying in a statement last week that it is “probably a good time to retire” the term “transitory” regarding inflation added to concerns that a longer-term problem may be afoot. The key thing now-for the economy and for the political prospects of Biden and the Democrats-is whether the inflation rise turns out to be temporary or permanent. After decades of wage stagnation for these low-wage workers, this represents a dramatic change. That’s a jump of more than thirteen per cent, or roughly six per cent after inflation. In the leisure-and-hospitality industry, between November, 2020, and November, 2021, average hourly wages went from $14.70 to $16.67. For many workers at the bottom of the income ladder-that is, the ones who need a pay raise the most-wages have risen faster than prices. Moreover, there is an important caveat to the news about wages. ![]() ![]() In a statement on Friday, the President pointed out that the economy has created nearly six million jobs over the past year, and that new unemployment claims have recently fallen to their lowest level in a half century. Add in that gas prices are roughly fifty-per-cent higher than a year ago and it’s not surprising that Biden’s economic approval ratings are lagging-despite a healthy growth in employment and household incomes. Inflation is now higher than virtually anyone predicted, and, over the past year, prices have risen faster than wages, which increased by 4.8 per cent. Sure enough, the report was an alarming one: it showed that prices rose by 6.8 per cent in the preceding twelve months-the biggest jump since 1982. That happened on Thursday, when President Biden warned that a Labor Department report on consumer-price inflation for November, to be released the following day, wouldn’t reflect a recent dip in gas prices. One surefire indicator that an upcoming economic statistic is going to be politically troublesome is when the White House tries to get out ahead of it.
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