Policymakers and economists had initially hoped that rapid price gains would fade quickly in 2021, and many still expect them to moderate throughout 2022. But economists are paying attention to a few factors that could keep prices rising too quickly for comfort.
Housing costs, based on what it costs to rent a place to live, make up about a third of the Consumer Price Index, so the fact that landlords are charging more will matter to overall inflation.
“My gut feeling is that the pace of appreciation is going to be slower in 2022 than it was in 2021,” said Jeff Tucker, a senior economist at Zillow. “But I don’t see rents actually dropping or getting more affordable.”
Global supply chains also continue to experience disruptions that are leading to shortages of parts and products and pushing costs higher across broad array of consumer goods.
The price of food grew 6.3 percent and apparel rose 5.8 percent in the year to December. Used cars and trucks — a big factor in price gains since last spring, along with new vehicles — surged 37.3 percent. Auto manufacturers have been struggling to obtain parts — particularly computer chips imported from Asia — delaying production of new vehicles and pushing up demand for a finite supply of used ones.
More disruptions could be in store. The Omicron variant of the coronavirus is leading to worker shortages for factories, ports, trucking companies and warehouses in the United States and overseas. And recent lockdowns in China meant to contain the coronavirus, inspired by the country’s continued embrace of a zero-tolerance policy when it comes to the pandemic, could exacerbate the chip shortage, among other supply chain issues.
Inflation F.A.Q.
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What is inflation? Inflation is a loss of purchasing power over time, meaning your dollar will not go as far tomorrow as it did today. It is typically expressed as the annual change in prices for everyday goods and services such as food, furniture, apparel, transportation costs and toys.
Is inflation bad? It depends on the circumstances. Fast price increases spell trouble, but moderate price gains could also lead to higher wages and job growth.
How does inflation affect the poor? Inflation can be especially hard to shoulder for poor households because they spend a bigger chunk of their budgets on necessities — food, housing and especially gas.
Can inflation affect the stock market? Rapid inflation typically spells trouble for stocks. Financial assets in general have historically fared badly during inflation booms, while tangible assets like houses have held their value better.
“If they stick to their zero-case doctrine, a global supply chain disaster is on the horizon,” Tinglong Dai, a professor of operations management at Johns Hopkins University Carey Business School, said about China.
Article source: https://www.nytimes.com/2022/01/12/business/economy/cpi-inflation-december-2021.html
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