Inflation is pretty much back to normal

23 December 2023

Dec 23, 2023

The personal consumption expenditures (PCE) price index—a measure of U.S. inflation—rose 2.6% from a year earlier in November. Excluding food and energy costs, the “core PCE” was up 3.2% year over year

Note: lower inflation just means prices are not going up as much as in the past. Except for seasonable items, prices are unlikely to go down.

From Heather Cox Richardson’s blog:

Data from the Bureau of Economic Analysis released today showed inflation continuing to come down. In November the Personal Consumption Expenditures (PCE) price index was 2.6% over the previous November, down from 2.9% in October. The Federal Reserve aims for 2%. Falling gas prices meant that overall, prices actually dropped in November for the first time since April 2020.
In a statement, President Joe Biden reminded Americans that “[a] year ago, most forecasters predicted it would require a spike in joblessness and a slowdown to get inflation down. I never believed that. I never gave up on the hard work, grit, and resilience of millions of Americans.” In addition to the falling inflation rate, he noted that “the unemployment rate has stayed below 4 percent for 22 months in a row, and wages, wealth, and the share of working-age Americans with jobs are higher now than they were before the pandemic began.”
“But,” he said, “our work is far from finished.” To continue to lower prices for hardworking families, he said, he is focused “on lowering costs—from bringing down the price of insulin, prescription drugs, and energy, to addressing hidden junk fees companies use to rip you off, to calling on large corporations to pass savings on to consumers as their costs moderate.”
The administration is highlighting economic numbers not just because they are good—and they are: real gross domestic product (GDP) grew by an astonishing annual rate of 4.9% in the third quarter of 2023; under Trump it was 2.5% before the pandemic knocked the bottom out of everything—but also because they illustrate the administration’s return to an economic theory under which the U.S. government operated from 1933 to 1981.
In those years the federal government focused on supporting people on the “demand side” of the economy in the belief that what drives economic growth is demand for goods and services. This theory means that the government should work to make sure workers and those at the bottom of the economy have money to afford the goods and services they need. This theory suggests that education and good wages and a basic social safety net are good for the economy because they enable people to have enough disposable income that they can buy things.

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