Bidenflation Remains Stubborn At 12.8%, Hurting Americans

 Commenting on the latest CPI data, Philadelphia Fed President Patrick Harker said Thursday morning that he expected the "eye-popping" inflation readings of 2022 were behind us and that it made sense to slow down the pace of rate hikes.

Harker's comment is somewhat misleading and out-of-sync with the pain of inflation felt by average Americans. Keep in mind that when Harker makes the statement, he focuses on only the past 12 months and thereby ignores that the prices sharply climbed during the 12 months of 2021.

The Consumer Price Index (CPI) released by the government last week showed a 6.5% year-over-year increase in prices from December 2021 to December 2022, edging down from a rate of 7.1% in November. The CPI has declined steadily from a 40-year high of 9.1% in June to 6.5% in December.

Prices have increased by 12.8% under President Biden's watch between February 2021 and December 2022. We developed the TIPP CPI, a metric that uses February 2021, the month after President Biden's inauguration, as its base and measures the rate of change.

While we recognize that CPIs are index numbers, for common understanding, when we refer to TIPP CPI and BLS CPI, we mean percent change.

Bidenflation, measured by the TIPP CPI using the same underlying data, stood at 12.8% in December. It was 13.2 in November, 13.3% in October, 12.8% in September, and 12.6% in August.

All TIPP CPI measures are anchored to the base month of February 2021, making it exclusive to the economy under President Biden's watch. Please note that we use the relevant Bureau of Labor Statistics (BLS)underlying data but recalibrate it to arrive at the TIPP CPI.

Significant inflation had already set in by the middle of 2021. In November 2021, CPI inflation was 6.8 percent. The official CPI year-over-year increases will compare prices to already inflated bases in the coming months. The year-over-year calculation may moderate the statistics, but you will still feel the pinch of inflation.

TIPP CPI vs. BLS CPI

The following four charts present details about the new metric.

The official year-over-year CPI increase reported by BLS is 6.5% for December 2022. Compare this to the TIPP CPI of 12.8%, a 6.4-point difference. Prices have increased by 12.8% since President Biden took office.

Food prices increased by 16.8% under President Biden's watch compared to only 10.4% as per BLS CPI, a difference of 6.3 points.

Energy prices increased 28.9% per TIPP CPI compared to 7.3% according to BLS CPI, a difference of 21.6 points.

The Core CPI is the price increase for all items, excluding food and energy. The Core TIPP CPI was 10.9% compared to 5.7% BLS CPI in the year-over-year measure, a 5.2-point difference.

Further, gasoline prices have increased by 28.9% since President Biden took office. However, the BLS CPI shows that gasoline price has slipped 1.51%, a difference of 30.4 points.

Used car prices have risen by 25.7% during President Biden's term. The BLS CPI shows that the prices have dropped by 8.8%, a difference of 34.6 points.

Inflation for air tickets under President Biden is 36.2% compared to the BLS CPI finding of 28.5%.

Americans' Concerns

The latest Investor's Business Daily/TIPP Poll, completed earlier this month, shows that nine in ten (89%) of survey respondents are concerned about inflation. Throughout the past year, inflation concerns have stayed above 80%. The share of "very concerned" has been over 50% for eleven consecutive months.

Most respondents (52%) say their wages have not kept pace with inflation. Only one in five (21%) say that it has. The share, who said wages had kept pace, has hovered in the 17% to 22% range since January 2022.

As a result of inflation, Americans are cutting back on household spending.

Most Americans are spending less on eating out (76%), entertainment (75%), purchases of big-ticket items (74%), holiday/vacation travel (72%), and memberships/subscriptions (64%).

Many (60%) are cutting back on even good causes such as charity giving. The high gasoline prices forced 58% to cut back on local driving. Nearly three out of every five (57%) households spend less on groceries.

Inflation Direction

The chart below compares the 12-month average of monthly changes against the 6-month and the 3-month averages. We also show the reading for December 2022.

The 12-month average considers 12 data points and presents a long-term reference, while the six-month and three-month averages consider recent data points.

To better understand, compare the three-month average to December 2022 data. For “all items,” the three-month average was 0.13 vs. -0.1 in December 2022. It is decreasing, and hence it is good.

Similarly, for "Energy," the rate is decreasing. The decrease in December 2022 (-4.50) exceeded the three-moving average of -1.43, indicating deceleration.

For "All items less food and energy," though the trend is down generally, the December reading of 0.30 was higher than the three-month average of 0.27, a cause for some concern.

The U.S. economy is in stagnation – high inflation combined with an economic slowdown.

To access the TIPP CPI readings each month, you can visit tippinsights.com. We'll publish the TIPP CPI and our analysis in the days following the Bureau of Labor Statistics (BLS) report. The upcoming release of TIPP CPI is February 16, 2023. We'll also post a spreadsheet in our store for free download.

https://tippinsights.com/bidenflation-remains-stubborn-at-12-8-hurting-americans/