In Dingmans Ferry, Pennsylvania, less than 50 miles from President Joe Biden's hometown of Scranton, where unemployment fell to a record-low 2.7% in April, surging consumer prices unleashed by the Covid-19 pandemic are now similarly subdued. Weis Markets Inc., the chain of 200 grocers mostly in the Keystone state, earlier this month sold a “choice” Porterhouse steak for $7.99 a pound to one of its regular customers. That would have been a bargain even during the Great Recession 15 years ago.
Not a steak lover? No problem. There are plenty of bargains available at your fingertips - literally. Adobe Inc. said last month that online grocery prices fell 3.7% in August from July, the largest decline since the firm began tracking the numbers in 2014. Thanks in part to big wage gains over the past couple of years, spending on food now makes up just 7.44% of consumer spending, the lowest since before the pandemic in February 2020, according to the Bureau of Economic Analysis.
Although Americans say they don’t like paying the current level of prices for goods and services that resulted from the worst bout of inflation in 40 years, they can take comfort from the fact that those prices, while admittedly not coming down in most cases, are actually becoming more affordable. All of which is to say the “elevated prices” narrative referenced by pollster Nate Silver, among the mainstream media's reporting on the Biden economy, has passed its sell date.
The inflation rate as measured by the Consumer Price Index, which tracks the degree of change in prices, showed a 2.4% increase for September from a year earlier. That’s 0.2 percentage point lower than the average since Bill Clinton in 2000 became the first president to visit Vietnam after the American War came to an end. And judging by a monthly survey by the Federal Reserve Bank of New York, Americans believe inflation is under control. Consumers see prices rising just 2.66% annually over the next three years, which is lower than the average of 2.76% throughout the Trump administration.
During the most recent round of quarterly earnings calls, the frequency of inflation cited by executives of companies that are part of the Russell 3000 Index tumbled 78% from the second quarter of 2022. Back then, CEOs and CFOs mentioned inflation 13,214 times, according to an analysis by Bloomberg Artificial Intelligence. “As it relates to value, we're lowering prices,” Carl Douglas McMillon, chief executive officer and president of Walmart Inc., told shareholders on the world’s largest retailer’s Aug. 15 earnings call. “For the quarter, both Walmart US and Sam's Club US were slightly deflationary overall. In Walmart US, we have more than 7,200 rollbacks across categories. Customers from all income levels are looking for value, and we have it.”
Those with the most money at stake, otherwise known as investors around the world holding $26 trillion of US government debt, were never in doubt about the path of inflation and its expectations despite erroneous predictions from some of the biggest pundits that the Fed was “behind the curve” and the fight to bring down rampant inflation would inevitably lead to a recession.
Based on so-called breakeven rates, which are a proxy for the market’s outlook for consumer prices by measuring the difference in yields of two-year nominal bonds and similar-maturity inflation-protected bonds, these investors never wavered in their belief that inflation's sudden spurt between 2021 and 2022 would abate in 2023 and diminish to the Fed's target of 2% by 2025. Even when the two-year breakeven rate was highest at 5% in March 2022, it was still 3.5 percentage points below the 8.5% CPI, an indication that investors were anticipating a temporary spike that would fade, according to data compiled by Bloomberg.
As for that inevitable recession, it never happened even with the unprecedented 31-month period of interest rate increases by the Fed that took the benchmark federal funds rate from near zero to 5.50%. As if that wasn’t impressive enough, gross domestic product grew at a 3% rate, becoming the world's best-performing economy to go along with the lowest unemployment since the 1960s, according to data compiled by Bloomberg. As for what’s ahead, none of the 63 economists surveyed by Bloomberg forecast a decline in GDP between 2025 and the second quarter of 2026.
Bill Dudley, former president of the Federal Reserve Bank of New York, chair of the Bretton Woods Committee and a contributor to Bloomberg Opinion, recently highlighted the favorable outcome that he never envisioned. “I've been too pessimistic about the risks of a so-called hard landing for the US economy over the past few years,” he wrote earlier this month.
Maybe we should have put more faith in key Biden administration officials such as Treasury Secretary Janet Yellen, Commerce Secretary Gina Raimondo - a Rhodes Scholar and former two-term governor of Rhode Island - and Lael Brainard, director of the National Economic Council and former vice chair of the Federal Reserve Board of Governors.
“We're seeing some inflation, but I don't believe it's permanent,” Yellen said at a March 2021 press conference following a Group of Seven finance meeting in London. “There still aren't a lot of signs of persistent long-term inflation,” Raimondo told Bloomberg News four months later, adding that 70% of the recent price increases were in product categories directly related to the pandemic, such as higher car prices resulting from a shortage of computer chips. It was Brainard who in July 2021 said the “recent high inflation readings reflect supply-demand mismatches in a handful of sectors that are likely to prove transitory.”
Unfortunately, their prescience has yet to be recognized by mainstream media. That’s fine. Americans don’t need anyone to tell them what they can plainly see with their own eyes. And it’s not just at the grocery store.
Since the inflation rate peaked in June 2022, the average daily national price of gasoline declined 37% to $3.20 a gallon from $5. Georgia on average posted $2.71; Mississippi $2.75; Oklahoma $2.80; and New Jersey $2.84 -- prices that are little changed from what consumers paid before the pandemic, according to data compiled by Bloomberg. Overall, gasoline and other energy items make up just 2.20% of household expenditures, lower than anything seen during the Trump administration pre-pandemic, Bureau of Economic analysis data show.
How is that possible? All but ignored by polls and the pundits is the reality that as inflation dropped from 9.1% to 2.4%, personal income growth increased to 5.6% from 4.9%, resulting in real income growth (wages after inflation) of 3.1 percentage points, a percentage point greater than the average in the 21st century, according to data compiled by Bloomberg.
All this is another way of saying everyone's wallet is more accurate about the Biden economy than anyone's vibe.
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