The official government inflation rate comes from the Consumer Price Index, which measures the prices of a basket of goods reflecting the overall annual consumption of items and services that an average urban household pays for.
As a national average, it can never accurately reflect what a particular household faces in a given city. It assumes that the average family buys all these goods and services in the same quantities. But that’s just not true, and it unintentionally hides how high inflation is for millions of people.
The prices of things people buy regularly are rising much faster than those of things they don’t buy. Food used at home, for example, has risen nearly 12% over the past year, while gasoline prices have jumped nearly 50%. Egg prices soared more than 32% last year.
These categories represent less than 20% of the overall CPI, but they are products that people buy every week. As a result, the political impact of these double-digit increases is likely to be worse than that of lightly purchased goods, such as doctor visits.
But even some of those goods that people don’t buy often are probably producing extreme inflation anxiety for some households. Most people don’t move, for example, and the majority of those who have stayed put for the past year likely have mortgages whose repayment amounts don’t fluctuate. But those who have bought a new home have almost surely suffered sticker shock. The price of a house has increased considerably 40 percent since March 2020, according to the S&P/Case-Shiller National Home Price Index. The nearly 7 million households that have purchased a New Where existing house in 2021 will not soon forget the exorbitant prices they encountered.
The same goes for people who bought a new or used car in the past year, who paid between 12% and 16% more on average than if they had bought the same car the year before. . Again, this is not something most people have experienced, since Americans typically keep their cars around for years. But almost 58 million used and new vehicles were sold in 2019, the last year with complete data. While companies have probably bought a lot of these, that means tens of millions of people have probably ventured out over the past year to buy a car or truck, and have seen these high prices on top of all the others. price increases that accumulate.
Together, these facts explain why Americans are furious with inflation. Big ticket items that they buy infrequently and everyday items that they buy every week are skyrocketing. The fact that the prices of some goods are only slowly increasing or, in the case of televisions and smartphones, decreasing does not compensate for the political impact of rapid price increases in more important categories.
The administration’s efforts to fight these hikes are ridiculously incompetent or tone-deaf. Blaming meat price increases on the lack of competition in the meat packing industry is economically illiterate; the industry hasn’t suddenly become less competitive over the past year, and it’s foolish to assume that all powerful packers would exercise their market power now, but not in previous years. Meanwhile, President Biden released stupid tweets insisting that oil companies reduce prices at the pump, but he continues to flatter the left by refusing to issue new oil drilling permits off the coast. Atlantic and Pacific coasts.
His deafness to gasoline prices is particularly troubling. He plaintively asked the despots of Saudi Arabia and Venezuela to increase production rather than encourage American producers to drill more wells. He even recently suggested that high gas prices were an opportunity for an “incredible transition” away from fossil fuels. Expect to see this clip in GOP attack announcements this fall.
Decades-low US inflation adds to the political impact of double-digit price hikes. The official inflation rate has not been this high since December 1981. Only those who are 60 or older already experienced something like this. For most Americans, it’s the shock of a lifetime. No wonder they’re furious. And they probably won’t see any relief until November.