It's also worth noting that 1 out of every 4 dollars in circulation has been created in the last year. The money has to go somewhere. So far its gone to assets not measured in inflation (stocks, real estate, etc), so its natural that it will eventually show up in consumer prices.

Personal savings rate jumped to over 30% in mid 2020 and again above 25% recently (lines up w/ stimulus payments). Historically this value has been 3 - 10% for the last 30 years or so. So there's a lot of money on the sidelines

https://tradingeconomics.com/united-states/personal-savings

This is not correct. A dollar get "created" only when it is taken as debt, otherwise does not enter the economy. Actually , the amount of dollars decreased, as people paid down debt, thus destroying the amount of money in the economy.

What you see is a supply side inflation (less goods due to supply chain interruption) and not demand side (more money).

I see this back and forth, could you help me understand why these dollars shouldn't be considered "created"? My limited understanding is something like this: Congress/President decide US citizens need stim checks. They decide to issue $1T+ in stim checks. The Treasury doesn't have enough money from taxes so it issues debt notes / T-bills. A lot of these T-bills then get purchased by the Fed with dollars they printed out of thin air. So how is it that printed Fed dollars are not ending up in the hands of the average citizen and thus entering the economy?

Stimulus checks are not debt - that’s helicopter money. And the “loans” made to businesses do not need to be repaid, or have 0% interest and are automatically forgiven after N years.

PPP loans are not 0%, they are insanely low though at 1% interest. Also they are not automatically forgiven, you have to complete paperwork, and even then it’s likely that 100% of the loan won’t be forgiven.

I'm not even sure it's that. The stated metric is how much prices have risen since May 2020. So it is the year-over-year change, but the baseline is a very weird covid-May.

I didn’t notice pricing being especially weak last year beyond gas in May 2020, quite the opposite actually, at least in my area.

April-May was the time period when prices across industries collapsed. Businesses were anticipating this massive recession and cut back production / dumped goods onto the market in preparation. When the opposite happened, and demand for goods spiked hard, lots of places were caught with their pants down, having already reduced production and laid off workers.

So there's going to be a lot of economic "whiplash" in comparing YoY metrics over the next few months.

You can see the effect here in cars sales:

https://www.goodcarbadcar.net/usa-auto-industry-total-sales-...

Apr 2020 was the lowest sales month by a healthy margin going back to 2005.

Different industries saw this same effect over the April-May period. You can see the looking at the performance of the total US stock market:

https://www.marketwatch.com/investing/fund/vtsmx

March-April prices collapse, and April-May, its on the upswing, by September, there's a total recovery.

https://www.marketwatch.com/investing/fund/vtsmx

Did you do a lot less shopping in May 2020 than normal? Less shoppers risking it at Best Buy might have led to lower prices, but selection bias means a lot of us good citizens who stayed inside didn't see it.

Not really. But then again, we mostly shop for food, which is where I noticed most of the price increases. I would say our grocery bill is now around 30% higher than it was pre-pandemic.

A common statement on short-term inflation is that most suppliers have roughly year long contracts which lock in prices.

There have been large liquidity injections since April of 2020, it's possible that we're looking at a very weird covid April/May + inflation.

Interestingly, it's about 5% annualized over the last month, 5% versus May 2020, and 5% growth vs May 2019. Not that any of those three numbers means much because pandemic.

Source: https://fred.stlouisfed.org/series/CPIAUCSL#0

May 2019: 255.371 May 2020: 255.942 Apr 2021: 266.832 May 2021: 268.551

>Interestingly, it's about 5% annualized over the last month, 5% versus May 2020

thanks, edited that in too.

I was confused by your edit which says "annualized == YOY" which isn't generally true, just specifically for May 2021.

> edit2: annualized == YOY, so either statement is correct

edit3: These are not defined as the same, they are coincidentally the same number

The problem is that people will collectively make this mistake (even if some fraction does pick up on this subtlety). Consequently, markets may react as though it raised 5%.

I wonder if people that trade on headlines would get ruined so fast that no particular, single headline would make much of a difference (i.e. most people who would be fooled by this would already have been weeded out by some set of previous headlines).

It is not annualised, it is annual (price increase from May-2020 to May-2021).

Monthly annualised and and quarterly annualised are a common measure - those both run between 8-9%. Not that that is anything to worry about - it's just the reversal of the -2% quarterly annualised inflation this time last year. (I.e. oil prices are back up at their previous price of $70/bbl after having gone to zero a year ago)

Yep the title should be edited as it's misleading.

It's not even annualized, according to the WSJ title it's 5% from May 2020.

>It's not even annualized, according to the WSJ title it's 5% from May 2020.

Thanks, edited my comment reflect that.

Thank you, that was my first question from reading the headline.

Yes, 5% over the last 12 years, which includes a, brief, collapse in spending. But!

Look at chart 1:

Apr2021 had 0.8% month to month May2031 had a 0.6% month to month.

Which annualize ((1+i)^12) to: 10% and 7% respectively.

Or, a better estimate:

((1.008)*(1.06))^6=1.087

Or 8.7%

And, this doesn't include that most of the money printed hasn't been allowed to slosh around yet and instead are being used to prop up financial markets.