What If We're Measuring Inflation All Wrong?

What If We're Measuring Inflation All Wrong?

Inflation is top of mind right now for many consumers, businesses and investors. Responding to a recent Bank of America survey, asset managers around the world agreed that inflation is the number one market risk, displacing COVID-19 for the first time since February 2020.

Another survey conducted this month found that over three quarters of Americans were either “very” or “somewhat” concerned about inflation. Perhaps not surprisingly, younger Americans who have not yet reached their peak earning years were most worried.

majority of americans are concerned about inflation right now
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Loyal readers know I’ve been writing about this topic a lot lately. There are many signs that inflation is already here: Commodity prices are up. Home prices are up. Energy prices are up. Shipping rates are way up. Used cars and trucks are through the roof.

And the trend is only going to accelerate as social distancing is relaxed and the economy steadily returns to “normal.” This week, the Department of Labor reported that initial jobless claims fell to their lowest level in a year. Last Sunday, 1.5 million people boarded commercial flights, the most since lockdowns began.

TSA Checkpoint Crossing Hit a new post-pandemic high
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Thanks to “stimmy” checks and unprecedented money printing, real disposable income is set to have its biggest increase ever in any given six-quarter period, says Credit Suisse. The firm expects U.S. consumption to surge an “extreme” 10% this year, triggering a significant jump in new orders and new hiring—all of which is highly inflationary. This month, in fact, U.S. manufacturers reported the sharpest rise in new orders since 2014, according to IHS Markit.

real disposabble income having perhaps its best six-quarter stretch ever
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