Rising costs bring inflation concerns, as the nation struggles to rebuild the economy
HOUSTON - It's hard to miss that a lot of 'everyday expenses' have been on the rise. The government says inflation climbed, last month, at the fastest rate in 12 years.
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For some, the price spike is reminiscent of the double-digit inflation in the 1970s, leaving concerns that we're heading that way again.
"We're going to quickly go back to 2% growth in 2022, or less" argues Houston economist Lance Roberts.
He believes rising costs are part of the transition out of the pandemic slowdown. That view doesn't take much of the sting out of paying more. From lumber, groceries, fuel, clothes, automobiles: a dollar simply doesn't stretch as far as it used to.
While the economy has a lot of complicated dynamics, today's prices hinge on two, key issues: first, supply chains are still struggling to catch up with manufacturers trying to build things, and consumers trying to buy things. Combined with the trillions of dollars of relief and stimulus, provided by the government, growing demand for limited supplies leads to higher prices.
"Some of this is permanent," says Roberts, "Other things, like lumber and some of the things going on, those will have a price decline once these supply-chain problems open themselves back up."
While some projections trend higher, Roberts suspects inflation could calm in the next six months. First, stimulus spending will run its course, supply chains will continue to catch up to demand, and employment 'should' continue to grow out of the massive pandemic job losses.
"Productivity has to come before you can have consumption," argues Roberts, "You've got to have a paycheck before you can consume, and the economy is 70% consumption. People have to work."
Employment is among the more stubborn pieces of the puzzle. Before the pandemic, there was already a debate over wage growth and the minimum wage.
Now, enhanced unemployment benefits leave businesses struggling to find people to work, which increases costs that are, in turn, passed on to consumers.