Why Inflation Is Surging
By Neil Irwin
Why Inflation Is Surging
Why Inflation Is Surging
Inflation numbers this week showed a 5.4 percent surge in consumer prices in the 12 months ended in September.
Here’s what to know →
Why Inflation Is Surging
Supplies are tight for many physical goods and for workers.
Companies can’t get the materials they need — there is a global microchip shortage, for example, which is throttling production at automobile plants in the United States.
And they can’t get enough workers to fill jobs, at least at prevailing wages.
The labor force is 3.1 million people smaller now than before the pandemic.
Why Inflation Is Surging
Second, demand is high, especially for physical goods.
Americans have trillions of dollars in pent-up savings from money they didn’t spend during the pandemic, and hundreds of billions of dollars in stimulus money sent earlier in the year.
Meanwhile, wages have been rising, with average weekly pay up 9.5 percent since before the pandemic. And stocks and other assets have gained in value, making people richer.
Why Inflation Is Surging
Some of the goods with particularly steep price increases in the last year include:
Used cars and trucks +24.4%
Uncooked beef steaks +22.1%
Gasoline +42.1%
Laundry equipment +19.1%
Hotels and motels +19.8%
Car and truck rentals +42.9%
Why Inflation Is Surging
These numbers are distorted a bit by comparing them with prices in the depths of the pandemic.
For example, hotel prices were artificially depressed in September 2020, exaggerating the inflation rate over the last year.
But that’s only part of the story. Overall prices are still significantly higher than they would have been if the pandemic had never happened.
Why Inflation Is Surging
There also appears to be some shadow inflation.
Some companies have been dealing with the supply/demand mismatch not by raising prices but by diminishing customers’ experience, like:
Effectively rationing goods by offering less choice
Offering worse customer service
Read more on inflation’s effects:
