Customer prices

Customer prices and inflation jumped to their highest level in 40 years at the end of 2021. This incident looks like a troubling development for economic policymakers and President Biden. Because increasing these prices may destroy the confidence of the customer, it will cast any doubt over the economy’s future.

The Consumer Price Index gained 7% in the year through December. After removing volatile prices like food and fuel, this index rose 5.5%. The last 7% inflation in its history was 1982.

Customer prices

The policymakers have waited for months for fading inflation. They hope that the supply chain issues might ease, allowing companies to deal with booming consumer demand. Instead, the coronavirus pandemic made these factories down. So, the shipping companies have tried to work with extended backlogs; Since the customers continuously start buying foreign goods at a rapid speed. The forecasts anticipate that the prices gain decrease this year. But there is a significant economic policy question for the Federal Reserve and Mr. Biden: “How quickly will this incident happen?” This question is still unclear.

Founder of the research firm Inflation Insights, Omair Sharif, said that 7% is a significant sticker shock. He explained that inflation could be stable around 7%; While easing back from that peak would take time. It’s likely to end in 2022 lower. This incident would still be more than 2% level, and policymakers prefer this amount of customer prices.

“To achieve to the good old day, we just need to chop a lot of wood and we must try,” Mr. Sharif said.

Cost of food and used cars

The new data on Wednesday represented that the cost of food and used cars are both increasing quickly. These data provided more evidence that rising prices are broadening beyond only a few pandemic-disrupted categories. Moreover, rents continuously increase steadily, and restaurant meals are getting more expensive. These are a sign that the recent wage and salaries are beginning to make higher prices; Because the employers tend to cover higher labor costs.

Increasing prices and their widespread is a worrisome development for economic policymakers. These policymakers are now responsible. But remember that this price increase is creeping into some areas that are not so directly affected by the pandemic. Federal Reserve officials have mentioned that they anticipate increasing the interest rates several times this year; because they are trying to cool the economy and demand in an attempt. This incident will prevent the pandemic-era burst in prices from becoming a permanent element of the economic landscape.

fighting against inflation

The Fed chair, Jerome H. Powell, declared on Tuesday that the central bank plans to fight against inflation after two years of supporting the pandemic-stricken economy. It wants to do this by keeping interest rates near zero. Officials expect that increasing customer prices would decrease significantly.

Customer prices
Source: https://www.nytimes.com/

Mr. Powell announced lawmakers during a Senate Banking Committee hearing on Tuesday: “if the inflation persists at a high level longer than what we expect, and if we have to increase interest rates more than before, we will do this.”

Officials in the Federal target a separate inflation index: the personal consumption expenditures measure. The data of C.P.I. published Wednesday feeds into those figures. These publications have released earlier. Because of these events, it could attract the investor and policymaker’s attention.

The first and most significant job of the Fed is to control inflations. On the other side, raising prices is a policy responsibility for president Biden. Democrats will enter a challenging midterm election year. In this year, they will plan to retain the control of Congress. Republicans have accused Mr. Biden and his party because of driving prices to a higher level. They believe that Biden and his party flooded the economy with too much money in 2021.

These concerns about inflation are also entrapping Mr. Biden’s ability to pass his social policy bill and sprawling climate. The West Virginia Democrat, Senator Joe Manchin III, holds a key vote; As the control of his Senate party is weak. He also added that high prices are the most significant reason he won’t back the legislation.

recession in pandemic 2020

Mr. Biden and his advisers have planned to change the figures positively. On the other side, they mention that increasing customer prices hurt people. They note the quick rebound for the economy from the pandemic 2020 recession. Falling levels of unemployment are one of the most critical examples of recession in 2020. The government is trying to apply all its power to alleviate supply chain issues and cool off costs. This job is in progress by releasing strategic petroleum reserves and pushing ports to extend their opening hours. Although, most economists believe that the moves help just around the edges.

On Wednesday, the government administration declared that the increasing monthly inflation had ticked down slightly. This headline inflation decreased from 0.5% to 0.8% in November.

President Biden stated: “This report emphasizes that with increasing prices and squeezing family budgets, we have still more works to do.”

Economists and policymakers had initially hoped that increasing prices would fade quickly in 2021. On the other hand, many policymakers still believe them moderate throughout 2022. At the same time, economists focus on a few elements that could keep prices rising too rapidly for comfort.

Housing costs

Housing costs make up around a third of the Consumer Price Index. Housing costs include costs to rent a place to live; Therefore, charging landlords is so important for the overall inflation.

Jeff Tucker, a senior economist at Zillow, said: “I think that the pace of appreciation will be slower in 2022 against 2021.” He added: “but I don’t think so that the costs of rent and customer prices would drop or get more affordable.”

Global supply chains experience some disruptions continuously. This incident causes shortages of products and parts and raises costs across many consumer goods.

The apparel price grew 5.8%, and food rose 6.3% in the year to December. Trucks and used cars had a high increase rate with 37.3%. Auto manufacturers have been trying to receive parts and some parts such as computer chips that Asia export them. These manufacturers have been delaying the production of new cars and rising demand for a limited supply of used ones.

We may face more disruptions. Factories are dealing with worker shortages because of the Omicron variant of the coronavirus. Moreover, there are fewer workers in ports, warehouses, and trucking companies in the US and overseas. Additionally, recent lockdowns in China because of coronavirus could also worsen the chip shortage, among other supply chain issues.

There are some signs that we may see the moderating depleted inventories and shipping route snarls. Although, most businesses believe that they have seen slight improvement.

Cost of shipping

According to data from Freightos Group, the price to ship a container with a capacity of 40 feet from Asia to the United States West is around $14,572 this week. This price is fewer than a peak of more than $20,000 in September. However, it is still a tenfold increase compared to two years ago.

In addition to customer prices, the group’s data also represented that delivery times of ocean shipments from China to the US reached near 80 days in December. This figure has humped 85% from 2019.

The executive vice president of strategy, Douglas Kent, said that we faced much wild nature of the supply chain over the last year. These events will happen continuously, and there is no way to relieve them.

Caroline McCroskey, the marketing manager of a furniture manufacturer, has faced these costs. He is 27 years from Tusla, and his responsibility is importing pieces and parts from China and Colombia and selling them to major retailers. After increasing the shipping container prices, this company has seen a sharp cost increase.

He said that the freight is terrible enough; Although, we have seen a significant increase in fabrics and leather hides. We’ve also seen a dramatic rise in other raw materials, such as steel and foam. He mentioned that nobody is optimistic about shipping rates returning to regular anytime soon.

As inflation has continuously increased, many customers’ confidence in America have decreased.

Increasing prices monthly

Wall Street analysts and economists emphasize a measure of prices that reduces fuel and food costs. The prices are increasing monthly, but these expenses matter to household pocketbooks.

In December, the gas price was acceptable and provided a better platform for customers. On the other side, the “food at home” prices have increased rapidly. These customer prices are more than meals in a restaurant with limited service. These costs raised by about 8% in 2021.

Jon Willow, of Interlochen, Mich, 55 years old, has seen grocery costs jump rapidly since the pandemic’s beginning. So much that she and her partner tried not to buy food and product in winter by canning different vegetables from their gardens; Therefore, they heated their henhouse so that their chicken kept producing eggs.

She said: “We have a policy that we should not leave any food behind. So, we try to use everything.” He also noted that they had preserved squash, tomatoes, and asparagus.

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