What you should know about inflation in the United States
Inflation has risen in wealthy countries over the past year, but it has risen faster in the United States, where the prices have increasedup 6.2% in October compared to the previous year. U.S. inflation has been exacerbated, in part, by Mr. Biden and his predecessor, Donald J. Trump, providing more budget support to the U.S. economy than their counterparts elsewhere, at a time when consumption patterns changed and did not quickly return to normal.
Republicans, and even some left-wing economists such as former administration officials Obama Lawrence H. Summers and Jason Furman, blamed the rapid rise in prices in the economy on the aid package that Mr. Biden signed on to in the spring. They say the program's direct assistance to Americans, including $ 1,400 checks to individuals and improved benefits for the unemployed, has fueled more consumer demand than the economy could support, pushing upward. the prices.
Mr. Biden bet these critThese are largely untrue - and that the Fed would be wrong to follow their advice. Contributors say excessive consumer demand is not driving the fastest price increases America has seen in decades, and the economy needs more fuel, not less. , to get the job done of earning wages and jobs for historically marginalized workers.
The President wants Fed Chairman Jerome H. Powell, whom he re-appointed this week for a second term, is joining him in this gamble - avoiding rapid interest rate hikes that could stifle growth, and which would not tackle what White House officials consider the real cause of inflation to be the virus.
"We are still struggling with the challenges and complications caused byCovid-19 which are driving up costs for American families, "Biden said Monday at the White House, announcing the reappointment of Mr. Powell and throwing the blame for inflation on the feet of the resurgent virus. Image A cafe that closed this summer in Washington. The resilience of the coronavirus has slowed Americans' return to spending on in-person services like restaurants and tourism. Credit ... Alyssa Schukar for Hfrance.fr
As prices increase globally in all industries and sectors of the economy, there is a wide chasm dn the rates of inflation of the physical things people buy and the services they consume. The consumer price index for services is up 3.6% from the previous year. For durable goods, it is up 13.2%. And these products represent a much larger share of US consumer spending than before the Covid-19 hit.
On the eve of the pandemic, about 31% of Americans' consumer spending was on goods and the rest on services. By September, this share had fallen to around 35%, down slightly from its pandemic highs. Those few percentage points made a huge difference for supply chains, which were suddenly carrying record levels of toys, electronics and other commodities from country to country, and under load.
The rescue plan of$ 1.9 trillion "boosted demand, and especially for the history of inflation, much of that demand has translated into reduced consumption of in-person services and increased demand of manufactured goods, "said Jared Bernstein, a member of the White House Council of Economic Advisers, in a speech this week.
" This, in tandem with the impact of the virus on transport logistics, played a role in the high price growth. "
Understanding the supply chain crisis Map 1 of 5
The impact of Covid on the supply chain continues. The pandemic has disrupted almost every aspect of the global supply chain and made all kinds of products more difficult to find. In turn, scarcity has driven up the prices of many things like inflation remains stubbornly high .
Almost everything that is manufactured is in insufficient number. This includes everything from toilet paper at new cars The disruption dates back to the start of the pandemic, when factories in Asia and Europe were forced to close and shipping companies cut their hours.
First, the demand for household items has increased. Money that Americans once spent on experiments has been redirected to items for their homes. The power surge obstructed the system to transporting the goods to factories that needed it and finished products piling up due to a lack of shipping containers .
Now the ports are struggling to keep up. In North America and Europe, where containers arrive, the massive influx of ships is overwhelming the ports. As the warehouses are full, containers are piling up. Chaos in global shipping is likely to persist due to the huge traffic jam .
No one really knows when the crisis will end. Shortages and delays are likely to affect the Christmas and holiday shopping season , but what happens next is you nclair. Federal Reserve Chairman Jerome Powell said he expects supply chain problems persist " probably until next year.
Mr. Powell offered a similar diagnosis to the White House on Monday. "The economy is growing at its fastest pace in many years, bearing the promise of a return to maximum employment," he said. “The challenges and opportunities remain as always. The unprecedented reopening of the economy, along with the lingering effects of the pandemic, has resulted in supply and demand imbalances, bottlenecks and exploding inflation. "
Mr. Bernstein, his colleagues at the HouseBlanche and many liberal economists say price increases are expected to fade away by next year. The current fight, while painful for consumers, is better than an alternate scenario where no bailout has been passed and the economy has rebounded more slowly this year, they say.
"Avoiding a deep recession is a huge advantage that must be weighed against the inflation we are seeing now. There is deep denial about it, ”said J.W. Mason, an economist at the John Jay College of Criminal Justice, City University of New York, who is a fellow of the Liberal Roosevelt Institute. He added: "I don't think there is a world where inflation is drastically less and economic hardship is also drastically reduced.
This tension has left White House officials trying to appease the hausprices themselves largely in trying to alleviate supply issues. In the spring, they formed a supply chain task force to deal with the still high demand for products such as semiconductors (which were crippling auto production and driving up car prices), timber. (which increased the costs of building houses) and food. Image Shoppers in Miami this spring. Americans shifted spending toward goods over services during the pandemic, and did not come back as quickly as Biden administration officials predicted. Credit ... Scott McIntyre for Hfrance.fr The administration has stepped up these efforts in the past months, announcing new actions and spending to reduce backlogs in ports and try to speed up the global flow of gummed products, whi ch has contributed to rising inflation in much of the wealthy world. On Tuesday, Mr. Biden announced that he was going release 50 million barrels of oil from the country's strategic reserve, as part of concerted action with five other countries aimed at reducing oil prices. gasoline prices, which have risen as drivers return to the roads in recent months.
But officials have discovered that there are few large levers that they can operate quickly to reduce shipping delays that have driven up commodity prices. The savingsAdministration stes say they are considering all options for further action and are promoting some recent progress in reducing backlogs at ports. The lack of specific details - or even ideas from corporate groups or elsewhere - about what other policies could quickly wipe out supply chains is revealing. Mr Biden's recent meeting on the subject with leaders of 14 countries at the Group of 20 summit in Rome did not produce any decisive agreement on what to do next.
In the meantime, Mr. Biden 's team hopes that the Fed will maintain its patience in the face of the recovery and not withdraw too quickly from its efforts to continue fueling economic growth. One of the reasons Mr. Biden hired Mr. Powell for another term, instead of raising Lael Brainard, the Fed Governor, he chosen to be vice-president , was the belief that Mr. Powell - an appointed Republican - carries a unique bipartisan credibility for his actions at a time when Republicans are hammering Mr. Biden on rising prices.
" At times like these, we need stability, testing, principle led the direction of the Fed, "Biden said Monday. He added, without elaboration but with a clear intention: "And we need people of character and integrity who can be trusted to stay focused on the right long term goals of our country - for our country. . "