Squeezing Americans is what Bidenflation is about

With 18% inflation, Americans’ purchasing power is diminished.

the third month in a row of increases.

The annualized rate of deflation remained stable at 6.0 percent, almost twice the CPI.

At 3.8%, core prices remain steadfast.

Related: RCM/TIPP: Americans’ Economic Confidence Declines in April.

Election season is upon us. The New York Times called President Biden’s plan B, citing his disastrous attempts to control inflation and his current attempt to pin the blame for “Bidenflation” on Trump. Biden is a seasoned politician. President Biden stated the following in response to the most recent CPI data:.

We are in a better position now than when we first took office, when inflation was through the roof. Furthermore, we have a strategy to address it, in contrast to the opposition, which only discusses two issues. All they want to do is raise taxes on the middle class while lowering them for the wealthy.

Under the President’s leadership, inflation will reach 18%, or 6% annually, which is the grim reality of Bidenomics. Inflation stood at just 1.4 percent when he took office. It has remained above the Federal Reserve’s 2 percent target for 37 months running since March 2021. ).

Excessive money printing by the Federal Reserve and government expenditure lead to inflation by increasing the money supply. Price increases result from this, which essentially taxes everyone in secret.

Many families are still under a lot of inflationary pressure, even though they have decreased from the mid-2022 highs. Real wages have decreased by 2.5 percent despite an 18.8% increase in prices. When Biden took office in January 2021, the average hourly wage for all employees fell by 2.5 percent, from $11.39 in January 2024 to $11.11 in March 2024. The chief economist at Moody’s Analytics, Mark Zandi, claims that the average U. S. As compared to three years ago, a household’s current monthly requirements have increased by $1,069 (or $12,828 annually), $784 from two years ago, and $227 from the previous year. According to the Allianz Life survey, 67% of respondents are more worried about their immediate bill payment than their long-term financial security.

Numerous people have been forced to relocate as a result of bidet inflation and the Fed’s eleven rate hikes intended to curb inflation. The average monthly payment for a new house skyrocketed to $3,322 in the third quarter of 2023, according to CBRE data. When compared to late 2020, when it was only $1,746 prior to Biden taking office, this represents a dramatic 90 percent increase. The homelessness crisis is being exacerbated by rising rent and the repeal of protections from the pandemic era.

Thus, it is not surprising that, in a recent nationwide TIPP Poll, Americans ranked inflation and food prices as their top economic concerns.

CPI Summary.

According to the government’s Consumer Price Index (CPI), prices increased by 3.5 percent between March 2023 and March 2024. The data was released on Wednesday.

From a 40-year high of 9 points1 percent in June 2022 to 3 points0 percent in June 2023, the CPI rate had decreased steadily for 12 months. It ended that run in July, rising to 3 point 2 percent. It has since shifted sideways between 3 and 7 percent.

The Consumer Price Index (CPI) rose by 0.4 percent between February 2024 and March 2024 after accounting for seasonality. In the same time frame, the cost of food increased by 0.1 percent, the cost of energy increased by 1.1 percent, and the cost of everything else (core) increased by 0.4 percent.

CROP TIPP.

We created a metric called the TIPP CPI, which measures the rate of change by using February 2021—the month following President Biden’s inauguration. Since February 2021 serves as the base month for all TIPP CPI measurements, the data is limited to the economy overseen by President Biden.

What is the TIPP CPI’s driving force?

Americans’ struggles with inflation are not adequately reflected in the BLS CPI rate. In the upcoming months, official BLS CPI year-over-year increases will be compared to already inflated bases, and these statistics may not fully reflect the impact. Furthermore, the low CPI rate is routinely used by the media and some economists to paint a positive picture of the economy that supports Biden’s policies.

As an illustration of Americans’ financial struggles under President Biden, however, the TIPP CPI rate is more useful. To compute the TIPP CPI, we take the pertinent data from the Bureau of Labor Statistics (BLS) and modify the period to reflect Biden’s presidency. To make the TIPP CPI and the BLS CPI easier to understand and compare, we translate the index numbers into percentage changes. Comparable to how the Dow Jones Industrial Average represents the stock market, CPIs are index numbers that illustrate how prices impact people’s lives.

Using the same underlying data, the TIPP CPI measured bidenflation in March and found it to be 18 points 8 percent. In January it was 17 points3 percent, in December it was 16 points6 percent, and in February it was 18 points0 percent.

TIPP CPI in contrast to. BLS Composite Index.

The details of the new metric are displayed in the following four charts.

The BLS announced a 3.5 percent annual CPI increase for March 2024. This is a fifteen-three-point difference from the TIPP CPI of eighteen percent. Since President Biden took office, prices have gone up 18%.8%. TIPP CPI is 6.0% annually.

Food prices rose by 20 points9 percent under Biden, while the BLS CPI showed a mere 2 points2 percent increase, a discrepancy of 18 points6 points.

According to TIPP CPI data, energy prices rose by 33.6 percent. However, the BLS CPI indicates that the cost of energy increased by 21¼%. There is an incredible 31 points and 5 points separating the two.

Aside from food and energy, the Core CPI gauges price increases across the board. The disparity between the Core TIPP CPI and the BLS CPI is 13 points, or 1.8 and 17.1 percentage points, respectively.

Furthermore, since President Biden took office, the price of gasoline has risen by 38 points3 percent, while the BLS CPI indicates a 1 point3 percent improvement—a difference of 37 points0 points.

Under Biden’s direction, housing costs increased by 20.4% while the BLS reported 5.7%, a 14-point8 point discrepancy.

The TIPP CPI reports that during this President’s term, used car prices have increased by 20.4%. In the meantime, prices have decreased by 2.2 percent, or 22 points and 6 points, according to the BLS CPI.

Airline ticket inflation is 35 points1 percent versus the 7 points1 percent improvement reported by the BLS CPI, a 42 point2 point difference.

According to the most recent TIPP Poll, which was conducted earlier this month, 84% of participants are worried about inflation. Inflation worries have been higher than 80% since January 2022. Since March 2022, at least 50% of respondents have expressed “extreme concern,” i.e. E. for the previous 26 months.

Just 20% of respondents say their income has increased in line with inflation, compared to 54% who claim their wages have not. This statistic has fluctuated between 18 and 21 percent since December 2023. The average over the last three months is 19.5%.

The amount of money earned without accounting for changes in the cost of living is known as nominal wages. However, real wages take inflation into account and calculate the purchasing power of an employee’s pay. Because real wages take into account variations in the cost of living, they offer a more accurate picture of what can be achieved with the income earned.

During the 38 months of the Biden presidency, from February 2021 to March 2024, real weekly wages, measured year over year, had negative readings for 26 of those months. It was June when the 26-month losing run ended. For nine months, between July 2023 and March 2024, the measure showed positive readings.

Americans are reducing their household spending due to inflation.

Reductions are being made in eating out (78 percent), entertainment (77 percent), expensive item purchases (76 percent), holiday/vacation travel (75 percent), and memberships/subscriptions (69 percent).

Giving to charities is being reduced by nearly two thirds (63 percent). Most households spend less on groceries—more than half, or 57%. Of those who drove locally, 54% said they drove less due to the high cost of gasoline.

The American Dream: Getting Your Own House.

The American dream of home ownership has not been aided by deflation.

As per Freddie Mac, the average 30-year home mortgage rate in 2021 was 2.96 percent, the year Biden assumed office. In 2022 and 2023, the rate increased to 5 points 34 percent and 6 points 81 percent, respectively. The 30-year mortgage rate is not significantly impacted by the Fed’s Funds Rate, which rose gradually from near zero in April 2022 to roughly 5 point fifty percent. However, rising inflationary expectations have contributed to rising mortgage rates. Currently, the 30-year rate stands at roughly 7.0 percent. Because of a severe housing shortage brought on by an increase in migration and an unmet demand for new home construction, home prices have skyrocketed. Moreover, a large number of Americans who currently have houses at low interest rates that have been locked in for 15 years are unable to sell because they will need to purchase them at rate increases. First-time home buyers have an extremely difficult time because many homes remain out of their reach due to these factors.

The impact of growing mortgage rates on the typical American household is shown in the chart below. In America, the typical home costs roughly $465,000. If a family were to borrow $418,500 over 30 years with a 10% down payment, that amount would be owed. Naturally, interest rates don’t change, but as more and more families pursue home ownership, a larger portion of their monthly income is set aside for mortgage payments. Other expenses associated with being a homeowner, such as real estate taxes, maintenance, and steadily rising home insurance premiums, are not included in this budget.

The direction of inflation.

In this chart, the monthly changes over a 12-month period are compared to those over six and three months. We display the March 2024 reading as well.

The six-month and three-month averages take into account recent data points, whereas the 12-month average takes into account 12 data points and provides a long-term reference.

To obtain a more lucid understanding, we generally juxtapose the March 2024 data with the three-month mean. The price increase for all items in March 2024 was 0.40%, higher than the 0.37% average over the previous three months. This indicates a notable decline in March.

Although the six-month average of 0 point25 percent is smaller than the three-month average of 0 point37 percent, this suggests that the rate of increase has recently accelerated during the last three months.

There is reason for concern as this pattern indicates that price increases accelerated sharply in March.

Food prices rose by 10% in March, less than the 0 percent average for the previous three months and the 0 percent average for the previous six months. It’s good news that the slowdown indicates food prices are not rising.

In the meantime, energy prices rose by 1.10 percent, faster than the three-month average of 0.83 percent, suggesting an acceleration. In addition, the three-month average rose in comparison to the -0 point30 percent six-month average and the 0 point25 percent 12-month average. In conclusion, things are getting worse for the energy sector.

Core inflation, or all items less food and energy, was 0.40%, which was also the same as the three-month average of 0.40%. The three-month average, which was 0.40%, was higher than the six-month average, which was 0.33%. The information paints a confusing picture.

To sum up, energy, staples, and every other item saw a decline in price in March, with the exception of food. Prices for food and energy usually rise at different rates. That being said, given the recent spike in energy prices, we expect food prices to rise in the months ahead.

The monetary strategy.

The Federal Reserve has increased interest rates eleven times in a row since March 2022, reaching a record high of 5.25 percent for its benchmark rate in 22 years.

We don’t know what lies ahead, with the core CPI firmly established at 3.8% and geopolitical tensions potentially causing volatility in the energy markets. We think it will take some time to get CPI inflation down to the Fed’s target of 2.0%, and further rate increases might be required.

The Debt to the Penny dataset, which is updated daily by the Treasury, indicates that the federal debt is $34.55 trillion. As of October 2023, the start of the current fiscal year, the U. S. is anticipated to pay interest costs exceeding $1 trillion, surpassing that of the U.S. S. spending on defense.

The difficulty in refinancing arises as a drawback of the growing federal debt. Prices for bonds are determined by supply and demand. Interest rates may need to remain high in order to draw investors and guarantee that the government can keep borrowing money if there is a large supply of government bonds (caused by high debt levels).

Concerns regarding this trajectory’s sustainability are shared by most Americans. Americans are being harmed and having their confidence undermined by high interest rates.

BofA Global equity strategist Michael Hartnett claims there are indications that the U. s. There have been many recent instances of the economy “flipping from goldilocks to stagflation.”. We have long been pointing out that there is economic stagflation.

You can go to tippinsights . com to access the TIPP CPI readings every month. Following the release of the Bureau of Labor Statistics (BLS) report, we will make available both our analysis and the TIPP CPI. The date of the upcoming TIPP CPI release is May 18, 2024. We’ll also make a spreadsheet available for download in our store.

For a small fee, download data from our store if you’d like to delve even deeper!