Understanding Covid-flation

[Nevilledog]

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Tweet text:Jordan Weissmann
@JHWeissmann
Must-read piece from @M_C_Klein about what drove inflation in 2021. He finds 70 percent of the deviation from trend was due to just three categories: Cars, oil, and meat. https://theovershoot.co/p/understanding-covid-flation…
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8:09 PM · Jan 20, 2022

https://theovershoot.co/p/understanding-covid-flation

After a long absence, 2021 was the year that inflation finally returned to the rich world.

Or was it?

The U.S. Consumer Price Index (CPI) rose more than 7% last year—faster than in any 12-month span since the early 1980s—but most of the excess inflation can be pinned on a handful of categories that account for a small fraction of the total index. If the prices of just a few specific items had grown at their pre-pandemic pace, instead of jumping by 50% or more, inflation in 2021 would have been remarkably close to the 1995-2019 average.

The good news is that what happened last year was the confluence of several distinct forces largely attributable to the extraordinary circumstances of the pandemic. As the public health situation normalizes and the shocks of the past two years fade, so too should the rate of price increases.1

The pandemic disrupted production in everything from meatpacking to motor vehicles. The threat of Covid also pushed consumers to alter their spending patterns. People the world over slashed their spending on services such as dental cleanings, college, and nights on the town. At the same time, consumers spent more than ever before on groceries, appliances, furniture, cars, exercise equipment, and housing—financed in part by the more than $10 trillion that governments disbursed to offset the impact of the pandemic on household incomes and corporate balance sheets.2

Disentangling the relative importance of these forces on overall inflation isn’t straightforward. My approach has been to look at how each of the components in the CPI has contributed to changes in the level of the overall index each month. In the chart below, for example, the blue bars represent price increases attributable to temporary pressures on specific sectors associated with the pandemic and economic reopening, while the smaller red bars represent the rest of the economy.

*snip*

[Hoyt]

1. Unfortunately, that 5% or so of IND voters we depend on aren't likely to read that.

There are all kinds of good arguments why Biden is not responsible. Unfortunately, the sitting Prez takes the blame.

Fortunately, inflation is but one issue when 2024 comes.

[Meowmee]

2. I think there is price gouging as well

Using the pandemic as an excuse. I found out staples raised their copy charge per page by 100% last year apparently.