Former Reagan economist Art Laffer discusses inflation, recession concerns and the impact of the election on the economy.
President Biden celebrated the December inflation report as a sign of progress in fighting high prices, even as the data suggested the road back to normal could be bumpy.
“We saw prices go down over the course of the year for goods and services that are important for American households, like a gallon of gas, a gallon of milk, a dozen eggs, toys, appliances, car rentals, and airline fares,” Biden said Thursday in a statement.
The report showed that the consumer price index, a broad measure of the price of everyday goods including gasoline, groceries and rent, rose 0.3% in December from the previous month. Prices overall climbed 3.4% from the same time last year.
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Both of those figures came in higher than expected amid a spike in food, electricity and rent costs, underscoring the challenge of timing high prices in the economy.
President Biden speaks to guests at Ingeteam Inc., an electrical equipment manufacturer, in Milwaukee on Aug. 15, 2023. (Scott Olson/Getty Images / Getty Images)
Biden acknowledged that “there is more work to do to lower costs for American families and American workers,” and said he would continue to urge large corporations to pass on savings to consumers as their prices ease.
While inflation has fallen considerably from a peak of 9.1% notched during June 2022, it remains well above the Federal Reserve’s 2% goal. And when compared with January 2021, shortly before the inflation crisis began, prices are up a stunning 17.6%.
INFLATION CLIMBS FASTER THAN EXPECTED IN DECEMBER AS HIGH PRICES PERSIST
“In the two-steps-forward-one-step-back inflation battle, December was a clear step back,” said Robert Frick, corporate economist with Navy Federal Credit Union. “Shelter prices accounted for half the increase, and there’s little relief in sight there as rents prove sticky and homeownership costs rise. Consumers felt the most immediate pain in December from higher food and energy prices, and those are the two commodities Americans are most sensitive to.”
High inflation has created severe financial pressures for most U.S. households, which are forced to pay more for everyday necessities like food and rent. Food prices are up 33.7% from the start of 2021, while shelter costs are up 18.7%, according to FOX Business calculations. Energy prices, meanwhile, are up 32.8%.
Pedestrians and shoppers in the SoHo neighborhood of New York on Feb. 26, 2023. (Gabby Jones/Bloomberg via Getty Images / Getty Images)
The burden is disproportionately borne by low-income Americans, whose already-stretched paychecks are heavily affected by price fluctuations.
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The typical U.S. household needed to pay $211 more a month in December to purchase the same goods and services it did one year ago because of still-high inflation, according to new calculations from Moody’s Analytics. Americans are paying on average $1,020 more each month compared with the same time two years ago.
The latest findings come amid growing pessimism among U.S. households about their financial situation under Biden.
A recent survey published by Bankrate shows that 50% of Americans say their financial situation has gotten worse since the 2020 presidential election. By comparison, just 21% think their financial situation has improved, while 26% believe it is unchanged.
“The plight of the economy over the next 12 months may help to dictate whether it was wise, or not, for President Biden to trumpet the branding of ‘Bidenomics,'” said Mark Hamrick, senior economic analyst at Bankrate.
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