(Headline USA) Even as President Joe Biden proceeds to take a victory lap on inflation numbers that have yet to reach the Federal Reserve’s baseline rate of acceptable increase, the administration’s gaslighting efforts to redefine “Bidenomics” appear to be premature at best.
Inflation in the United States likely rose in July for the first time in 12 months, driven higher by more expensive gasoline and suggesting that the fight against rising prices may prove bumpier in the months ahead.
The inflation report the government will issue Thursday is expected to show that consumer prices increased 3.3% from 12 months earlier. That would mark an uptick from a 3% year-over-year increase in June—the lowest such figure in more than two years.
However, even the 3% number was misleading considering it was a higher rate of monetary devaluation than what Biden inherited when he became president, debunking any claims from Democrats that inflation has “decreased” on his watch.
With the U.S having just experienced an unprecedented credit-rating downgrade due to the administration’s unfettered spending, the uptick in July’s inflation may signal that trouble still lies ahead for weary consumers, many of whom are barely scraping by in Biden’s economy.
On a month-to-month basis, consumer prices are thought to have risen 0.2% from June to July, the same as in the previous month, according to a survey of forecasters by the data firm FactSet.
A jump in energy prices was likely a major contributor to higher inflation in July. Gasoline prices have surged nearly 30 cents over the past month to a national average of $3.83 a gallon, according to AAA.
Excluding volatile food and energy costs, so-called core prices are expected to show a 4.8% rise in July over the previous year and 0.2% from a month earlier, unchanged from the previous month’s increases.
Thursday’s inflation data will be among the key metrics the Federal Reserve will consider in deciding whether to continue raising interest rates. In its drive to tame inflation, the Fed has raised its benchmark rate 11 times since March 2022 to a 22-year high.
Those rate hikes are believed to have helped significantly slow price increases: After peaking at a four-decade high of 9.1% in June 2022, year-over-year inflation has dropped month after month.
Yet inflation remains above the Fed’s 2% target. And economists say the easy progress has likely already been achieved.
Gasoline prices, for example, though liable to bounce around from month to month, have already plunged from a peak national average of more than $5 a gallon.
Biden’s profligate spending and his extreme cuts to U.S. energy production are largely to blame for the issue, despite being handed an economy that was on the cusp of roaring back from a year of pandemic lockdowns.
The supply-chain shortages resulting from Transportation Secretary Pete Buttigieg’s incompetence and absenteeism also created a significant burden in the early months of the inflationary surge, which began almost immediately after the Democrat administration assumed office.
Ports, factories and freight yards were overwhelmed by the explosive economic rebound from the pandemic recession of 2020. The result was delays, parts shortages and higher prices.
But supply-chain backlogs have eased in the past year, sharply reducing upward pressure on goods prices. Prices of long-lasting manufactured goods actually dipped in June.
Now, the Fed faces a daunting problem: persistent inflationary pressures in service businesses—restaurants, hotels, entertainment venues and the like—where wages represent a substantial share of costs. Worker shortages have led many of these services companies to sharply raise pay.
But once again, the problem may be directly attributable to Biden, who pronounced that the solution to bringing workers back from their pandemic-era leaves of absence, fueled by government subsidies, was simply to “pay them more,” without regard for the ripple effect that would have.
È qualcosa che era arrivata addirittura al suo orecchio nel 2021
Non riuscite a trovare lavoratori?
Biden: "Pay them more" pic.twitter.com/YpdZFSb0lb— Ottavio Agretti (@OAgretti) December 27, 2022
Last week, the Labor Department reported that average hourly wages rose 4.4% in July from a year earlier, more than expected. To cover their higher labor costs, companies have typically raised their prices, thereby fueling inflation.
Another factor working against continued declines in year-over-year inflation rates is that prices soared in the first half of last year before slowing in the second half. So any price increase in July would have the effect of boosting the year-over-year inflation rate.
Despite chronic concerns about higher labor costs, one closely watched measure of wages and salaries—the Labor Department’s employment cost index—grew more slowly from April through June.
Excluding government jobs, employee pay rose 1%, less than the 1.2% increase in the first three months of 2023. Compared with a year earlier, wages and salaries grew 4.6%, down from a year-over-year increase of 5.1% in the first quarter.
Rents, which had soared after the pandemic, are also cooling. Researchers at the Federal Reserve Bank of San Francisco wrote this week that “year-over-year shelter inflation will continue to slow through late 2024 and may even turn negative by mid-2024.″
Some economists continued to maintain a rosy outlook about the trend lines—likely due to the prospect of ongoing Fed rate hikes and prices having already hit a critical mass to chill consumer spending on many nonessentials.
“I do think we’re going to get further deceleration, even if we do get a little bit of a pickup this month,’’ said Thomas Simons, senior U.S. economist at the investment firm Jefferies.
“Looking toward the end of the year, I think it’s pretty likely we’ll see headline inflation closer to 2%, which at the end of the day is not the worst thing ever considering how high inflation was in the past two years and how much more tolerable 2.5% inflation is,” Simons added.
But the Fed, Simons suggested, may not consider its work done until inflation returns to 2%.
Fed officials will have plenty of data to absorb before deciding whether to continue raising rates. Thursday’s report is the first of two CPI numbers the policymakers will see before their next meeting Sept. 19-20.
In addition, their favored inflation gauge, called the personal income expenditures price index, comes out on Aug. 31. And the August jobs report will be released Sept. 1.
Many economists and market analysts think the Fed’s most recent rate hike in July will prove to be its last: Nearly 87% of traders expect no Fed hike next month, according to the CME Group’s FedWatch Tool.
Adapted from reporting by the Associated Press
