Went to the town dump the other day. Had my bottles and cans separated, my cardboard boxes flattened. But, I was in for a shock.
The little stickers we residents are required to put on our bags of nonrecyclables had doubled in price, seemingly overnight, to $2. It was then that I realized our country is facing a deadly menace: inflation.
The Bureau of Labor Statistics announced the other day that consumer prices are running 5.4 percent ahead of this time last year. That’s the highest inflation rate since 2008. Meanwhile, regular gas is up by nearly a dollar a gallon since last summer. Beef roasts cost 6.4 percent more, car rentals 12 percent, two-by-fours nearly 300 percent.
Prices seem to be higher for almost everything, from haircuts to hotel rooms.
It’s clear what’s going on. With our COVID-crippled economy reopening, people are out spending again. But, businesses haven’t rebuilt their inventories or workforces, and thus can’t keep up with surging demand. Nor can their suppliers, so nearly everybody in this shortage-plagued economy is passing along price increases.
Restaurants, for instance, are finding they must pay more for ingredients — and for COVID-shy cooks and servers — so, menus have gotten pricier. Semiconductor manufacturers can’t supply enough chips to carmakers, so, folks who need new wheels to return to work are turning instead to used vehicles — driving their prices through the sunroof.
Consider the most popular used car in America right now: the 2018 Nissan Rogue SV. Last year, it sold for an average of $16,750 in the wholesale market, according to the Manheim Index. Last month, it was fetching $21,100.
The danger of inflation is that people will get accustomed to paying more, and they’ll demand higher wages to stay whole. That perfectly normal response could send prices even higher.
We’ve seen this car wreck before. Inflation hit double digits back in the 1970s, as a spike in oil prices ricocheted throughout the economy. Be very afraid.
Except, that it ain’t gonna happen. I’m not an economist (actually, I was; that’s another story), but I can assure you that the current wave of price increases will probably fade in a few months, once companies get back up to speed and more workers find the jobs they want.
That’s pretty much what the Federal Reserve is saying. That’s very much how Wall Street investors are behaving. And that’s precisely what most real economists believe.
Including my neighbor, Paul London, who’s so smart he has his trash collected and doesn’t have to set foot in the town dump. As he wrote recently on the policy website The Hill, a wave of deregulation in the 1970s and ’80s injected much more competition into the economy than we had back in the double-digit-inflation days.
Our current president must have read that article, since he just signed an executive order with 72 measures to curb corporate power and make firms compete harder. As Dr. London says, competition makes companies less likely to raise prices.
Which seems to be the case already. As sawmills gear up to meet rising demand, lumber futures have declined in recent days. The Institute for Supply Management found that prices in the service sector eased slightly last month. Manheim reported that the average wholesale price of a used car fell 1.3 percent in June, the first month-to-month decline since December.
Besides, the latest annual inflation numbers look high because they were so low in the same period last year, when COVID had us cowering in our homes and inflation was only about 1.5 percent. Economists call this comparison problem the “base effect.”
At the dump, we call it stupidity. Those bag stickers? They’d been the same price since cars had tailfins. That means — as Ed at the trash compactor could show you on the back of a used envelope — the long-term inflation rate for stickers is probably about 2 percent.
I can live with that. The Fed certainly can, since 2 percent has been the central bank’s official target rate for years now.
So, I’m starting to think about one of those 2018 Nissan Rogue SVs. They will almost surely be cheaper in a few months, and they have lots of cargo space for those enlightening trips to the dump.