Increasingly large stacks of coins around a shopping basket full of groceries

Market Insider: April 26, 2022

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U.S. Money Reserve

Apr 26, 2022

Nancy Tengler, CEO and CIO at Laffer Tengler Investments, told reporters at Barron’s that “persistent and sticky inflation will be with us for a long time.” Many consumers are already feeling the effects of increased inflation in their day-to-day lives. If Tengler is correct, consumers may continue to be impacted by inflation for some time.

Consumers are already feeling the effects of increased inflation.

Purchases for household goods such as food are costing more. According to a report by the U.S. Department of Agriculture, grocery prices rose nearly 9% year-over-year in March 2022. The USDA forecasts that food prices will rise another 4.5–5%.

The cost of purchasing a home has also increased. On April 20, 2022, The Wall Street Journal reported, “U.S. home prices reached a record $375,300 in March [2022].” This growth was matched by rising costs of building new homes. On April 8, 2022, the U.S. Census Bureau announced that single-family home construction costs went up 17.5% from 2020 to 2021. According to Fox Business, this was the largest yearly spike since 1971.

Consumers’ incomes might not be able to keep up with growing prices. Moody’s Analytics chief economist Mark Zandi said that while “wage growth is strong…inflation is stronger” in an interview with Fox Business published April 1, 2022.

Rising inflation isn’t only affecting consumers—it’s also impacting businesses and import costs.

Worker looking on as forklift moves shipping containerOn April 13, 2022, the Labor Department announced that the Producer Price Index (PPI), which measures inflation at the wholesale level before it reaches consumers, jumped 11.2% in March from the previous year, indicating higher costs for businesses. Month-to-month PPI had grown by 1.4% since February 2022.

The costs of imported goods have also risen. According to data from the Labor Department, import prices surged 12.5% from March 2021 to March 2022. March 2022 alone saw a 2.6% increase, with non-fuel imports rising 1.2%.

Analysts project that inflation rates will continue to increase over the long term, further impacting consumers.

According to the results of the New York Federal Reserve’s March survey released on April 11, 2022, consumers now predict that inflation will reach 6.6% over the next year. Several professional analysts have made similar predictions.

On April 18, 2022, executives at Bank of America said that they expect elevated inflation to continue through the remainder of the year and that the BoA has changed its reserves accordingly.

A survey of 72 economists conducted by Bloomberg in early April 2022 shows expectations of inflation, as measured by the Consumer Price Index, reaching 5.7% in the final three months of 2022. This prediction is higher than the March 2022 survey’s average prediction of 4.5%.

The Federal Reserve is currently changing its fiscal policies in an attempt to quell rising inflation. However, according to The Wall Street Journal, “During the past 80 years, the Fed has never lowered inflation as much as it is setting out to do now—by 4 percentage points—without causing a recession.”

Inflation and its consequences, which have been impacting both consumer purchasing power and business growth, may continue to affect the economy for some time.

Read U.S. Money Reserve’s “Market Insider” each week for more economic insights. Nothing herein should be considered as portfolio or retirement advice as U.S. Money Reserve (“USMR”) cannot and does not offer financial advice. Clients should consult a financial advisor for specific advice. This commentary is provided by USMR for informational purposes only and is provided on an “as is” basis without any warranty of any kind, whether express or implied. Your use of the information provided in this commentary is entirely at your own risk. In no event will USMR be held liable for any indirect, special, incidental, or consequential damages arising out of the use of information contained in this commentary.


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