U.S. President Joe Biden speaks about the November jobs report at the White House in Washington, U.S., December 3, 2021.
Kevin Lamarque | Reuters
The Labor Department’s consumer inflation report shows prices are still soaring.
But inflation as hot as 6.8% year-on-year is Consumer Price Index Report Friday is probably the best the Biden administration can hope for at this point.
While virtually every economist is predicting inflation will stay high for the foreseeable future, some on Wall Street were worried ahead of Friday’s data release that Inflation may have spiked up to 7% and up in November.
Several economists who spoke to CNBC suggested that November report could show early signs that inflation could peak in the next few months.
Bank of America economist Alex Lin thinks it’s time to stop calling inflation “transient,” but a combination of factors leads him to believe that inflation could peak around March or April. .
“Our view is that the peak will probably be around early next year, maybe the first quarter,” Lin said. “And the reason we mean that is largely because of the underlying effects types. As you recall from earlier this year, when you arrived around April. [2021], core inflation is extremely hot. ”
Whether it’s too late for a White House looking to turn voters’ negative views on the economy, however, the president and his party before the 2022 term remains to be seen.
Core issues
Core inflation is a more refined view of overall price increases that remove fluctuations in frequently fluctuating food and energy prices. While the price of gasoline, home energy, and grocery prices are important to everyday Americans, the Federal Reserve likes to look at core inflation because it is insulated from the statistical “noise” of Wild food and energy price volatility could take on a calmer pattern.
From April to June, core CPI increased by an average of 0.85% per month – the fastest increase since the early 1980s – as millions of Americans looked to buy used cars ahead of the summer months. The core print has since cooled down and increased by 0.53% between October and November.
So with the year-to-year differential comparisons to come, Lin said he doubts the US economy will continue to see inflation continue to rise at a similar rate.
“As you go into next year, the question is: Can you repeat those prints?” Lin said of the core inflation rate seen this spring. “In our view, that seems unlikely.”
To be sure, no one expects inflation to drop near the Fed’s 2% target anytime soon, and some say it could be years before price growth declines to pre-pandemic levels.
There are still some warning signs to watch out for in the coming months: Rents, which account for about 40% of the core CPI, continue to heat up and drive up the cost of living for Americans nationwide.
The annual increase in The rent requirement for new leases moves in at 13.9% in November, while rents rose 0.4% in October and another 0.4% in November. Those increases brought annual rent inflation to 3% in November, still lower. pre-pandemic rate but up from 1.9% in July.
“I guess the most notable aspect is that you’re seeing some of the more resilient components starting to work a little more solidly,” said JPMorgan chief economist Mike Feroli. “Most notable are the two main rental measures.”
He added: “Things like food away from home tend to be quite expensive, and noted that prices at restaurants and bars appear to be going up.
The price increase in the foodservice industry is not a surprise amid the well-documented inflation of the cost of protein and acrimonious demand by managers for chefs, waitstaff and laborers. other motion.
Headache because of the White House
Economists are closely watching the Labor Department’s monthly update on average hourly earnings for any signs of a pay rise as employees look to keep up with inflation and capitalize on the situation. ongoing labor shortage.
While most economists say the Covid-19 pandemic is to blame for the ongoing inflation problems, voters can blame the White House for continuing to raise gas and grocery prices.
President Joe Biden’s approval ratings have taken a hit in recent months, and survey respondents continue to say they’re worried about the US economy and inflation.
CNBC’s Most Recent All-American Economic Survey Shows Biden Overall approval rating stable at low 41%. However, the president’s economic approval sank deeper at 37% versus 56% disapproval, down from 40% in favor to 54% in the second-quarter survey.
If Americans remain worried about inflation through November 2022, Biden and other Democrats could have a hard time maintaining control of both the House, which has a narrow Democratic majority, and the Senate. , is split 50-50.
Cause of optimism?
White House economic adviser Cecilia Rouse sounded upbeat on Friday when she told CNBC that the November inflation report could precede a slowdown in inflation in the first half of next year.
“I think inflation will ease in the coming months,” Rouse, who serves as chairman of the White House Council of Economic Advisers, said after Friday’s CPI release.
“Obviously, that’s going to depend on a few things,” she added. “But as we work hard to get the vaccine in the armament, as we vaccinate the rest of the world, economies around the world will recover and we will see pressure.” inflation eased.”
Optimism about the ability to moderate inflation is not unique to Democrats.
Tony Fratto, a Treasury Department official in the George W. Bush administration, said he thinks the inflation data is meeting expectations which is a good thing.
“I think before printing, people were worried about getting a bad surprise,” he said. “It nailed the expectations.”
He continued: “There are very good reasons to believe that inflation will moderate in 2022. Due to the withdrawal of fiscal support, cuts, adjustments on supply chain issues. “In six or seven months, we won’t be talking about inflation the way we’re talking about inflation today.”
U.S. stocks, which typically don’t like hotter inflation, appear to have posted their fastest rate of inflation since 1982. S&P 500 rose 0.62% in afternoon trading.
“I think I find some consolation, if only slightly, that it hasn’t gone that high, that it’s in line with expectations right now,” said Lindsey Bell, investment strategist at Ally Invest. now,” said Lindsey Bell, investment strategist at Ally Invest. “I think the fact that we’re not making significant leaps, month-to-month, it seems like we’re stabilizing.”
