We could be on the verge of a golden era for inflation nonsense. If so, its start date may well turn out to have been Tuesday morning, when new data on consumer prices was released.
The potential for misunderstanding derives from several forces crashing against each other at once. There are sure to be shortages of some goods and services as the economy creaks back to life, which could create scattered price increases for airplane tickets or hotel rooms or, as has been the case recently, certain computer chips.
There are valid concerns that the trillions of dollars of government stimulus dollars could push the economy beyond its limits and create a broad-based overheating.
But to be a savvy consumer of economic data, it’s important to separate those potential forces from the inflation data coming right now, which tells us more about the past than the future. Don’t take the backward-looking information in the new report as proof that those inflation warnings are coming true.
strange episode last April when the price of crude oil futures went negative?).
Demand for gasoline, jet fuel and other petroleum products is finally rising, but energy producers can’t flip a switch and produce enough fuel to meet that demand overnight, and are doubtless scarred by their losses last spring.
Similarly, grocery prices are up substantially: an annualized 3.8 percent rise since February 2020, led by a 5.9 percent rise in the price of meat, poultry, fish and eggs. If it feels as if proteins are more expensive than before the pandemic, you’re not imagining it.
Central bankers tend to look past swings in energy and food prices, which tend to fluctuate in ways that don’t portend inflation across the economy. But some elements of “core” inflation are also showing odd inflation dynamics, even when corrected for base effects.
Used cars and trucks, for example, are up an annualized 11 percent since February 2020, most likely because many people sought a way to get around besides public transport.
The flip side of that: Airfare is still far below its prepandemic levels, down an adjusted 23.9 percent from February 2020. There is plenty of reason to expect that airplanes will be crowded this summer, especially on routes to leisure destinations, as a newly vaccinated population looks to stretch its wings. But prices still have not caught up to their prepandemic norm.