Cue the Freakout from the Establishment Economists

Year over year inflation reached 7% in December, and the usual suspects will use this to argue that we need to back off the deficit spending and reduce social welfare spending.

Of course, if the number had gone down, they would use this to argue that we need to back off the deficit spending and reduce social welfare spending.

The important part for them is to make sure that poor people are hurt.

As Zathros would say, "At least there is symmetry."

U.S. inflation hit its fastest pace in nearly four decades last year as pandemic-related supply and demand imbalances, along with stimulus intended to shore up the economy, pushed prices up at a 7% annual rate.

The Labor Department said Wednesday the consumer-price index—which measures what consumers pay for goods and services—rose 7% in December from the same month a year earlier, up from 6.8% in November. That was the fastest since 1982 and marked the third straight month in which inflation exceeded 6%.

The so-called core price index, which excludes the often-volatile categories of food and energy, climbed 5.5% in December from a year earlier. That was a bigger increase than November’s 4.9% rise, and the highest rate since 1991.

On a monthly basis, the CPI increased a seasonally adjusted 0.5% in December from the preceding month, decelerating from October and November.

………

Prices for autos, furniture and other durable goods continue to drive much of the inflationary surge, fueled by largely pandemic-related imbalances of supply and demand that most economists expect to fade as Covid-19’s impact on economic activity eases. Prices of used cars and trucks soared 37.3% in December from a year earlier, while living room, kitchen and dining room furniture jumped 17.3%.

Economists and the Federal Reserve expect inflation to ease this year as supply bottlenecks clear and demand normalizes, but the Omicron variant of Covid-19 has renewed uncertainty about the economic outlook as the pandemic continues.

………

The December inflation data suggest a mixed initial impact of the Omicron variant, which is posing a new threat to the economy as the pandemic enters its third year. Prices for airline fares and, in particular, hotels accelerated in December, though those for recreation services fell. Prices for in-person services generally slumped during previous surges in Covid-19 infections.