Moody's Talks - Inside Economics - Groceries & Gouging

Episode Date: August 16, 2024

With the release of July’s consumer price index this week, the Inside Economics team discusses the current state of U.S. inflation. As they dig into the underlying details, they debate what they see as root causes. Specifically – are corporations taking advantage of consumers by keeping prices higher than they should? If so, are recent policy proposals to address ‘price gouging’ likely to be effective? Hosts: Mark Zandi – Chief Economist, Moody’s Analytics, Cris deRitis – Deputy Chief Economist, Moody’s Analytics, and Marisa DiNatale – Senior Director - Head of Global Forecasting, Moody’s AnalyticsFollow Mark Zandi on 'X' @MarkZandi, Cris deRitis on LinkedIn, and Marisa DiNatale on LinkedIn Questions or Comments, please email us at [e-mail]. We would love to hear from you.  To stay informed and follow the insights of Moody's Analytics economists, visit Economic View. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome to Inside Economics. I'm Mark Zandi, the chief economist of Moody's Analytics, and I'm joined by a few of my colleagues. We've got Chris D. DeRides and Marissa D. Natali. Hi, guys. Hey, Mark. My two co-hosts. How are you guys doing?

Very well. How are you? You look like you're in a hotel room. I am indeed. I've been in D.C. for the last couple of days. Interesting set of meetings. A lot going on. It's toasty here, though.

I've been running around. But good meetings. And we've also got Matt Collier. Hey, Mark. Nice to see everybody. Hi. I practiced saying your name. That was perfect, I would actually say.

Wow. Really? Yeah. Oh, I got, you know, the emphasis correct and, you know, all the consonants correct and everything. Okay. It's amazing that you can easily say DeNatali and Derides, but you struggle with Collier. Yeah, it's an Italian bias. Is that weird?

Really? No, I would argue those are probably more difficult to pronounce. No, but it's phonetic, right? I look at your name. Well, maybe not. I think Collier's pretty phonetic. Oh, no. It's been a lifetime of no one gets it right.

Yeah. I've given up. No one gets my name right either. Neither. Really? No one even gets my first name, right? Chris say your last name? Deritis.

Okay. That's a high ball. Who the hell's going to say that? That's a high bar, I think. That's a high bar. That's a high bar. With an Italian accent. Deletes.

I got to practice that. There you go. There you go. All right. Well, we have a lot to talk about. This is a big week for economic data. And I think the marquee statistic was the consumer price index, CPI. Matt, you always give us a rundown there.

What's going on with the CPI? Another really good report. I mean, high level. interpretation. I don't think there's another way to look at it. It falls in line with what we've seen the past few months or what's now the majority of 2024, which is inflation steadily cooling, really hard to find something to be alarmed at within the report. So headline CPI rose 0.2% from June to July. I think we're still in two digit conversation territory. So 0.15 rounded up, that's a good thing.

And that comes after a slight decline in June. But the, so it's a slight increase and it was enough to lower the year ago rate for the headline CPI from 3% to 2.9%. It's a little psychological threshold there seeing that first digit as a two. The Fed's inflation target is 2%. So we're tangibly moving in the right direction. within components, energy was neutral after a few months of really bigger decline. So 2% fall in May, 2% decline in June, and then kind of neutral in July. Gas prices basically move sideways.

Natural gas prices flow through to energy. It's what powers the electrical grid. That was a modest increase, but ultimately it's all a wash there. food inflation remains really mild. So 0.2% increase for the totality of food, the CPI for food. But of course, there's two important subcomponents there. There's food at home, which is mostly referred to as grocery prices kind of interchangeably. So if we look at that, food at home rose just 0.1%.

And that leaves year-over-year growth at 1.1%. Again, that's encouraging because if you look at the other, of food, it's food away from home. That's more of a luxury, that's dining out. But we talk about necessities and there's a lot of talk about, okay, inflation's cooling, but look at necessities. That inflated, inflation has been concentrated in these things that people really have to buy, and that's why people are so downbeat. So I focus a lot on food at home, as do many others. So that was really positive development, that growth is slowing and has been in that range, that 0.1% increase per month for a while now.

Food at home, more labor intensive prices rose.2%, which is nice deceleration, but still there. Less relief dining out comes at a premium relative to the supermarket. Core CPI, we've got food and energy out of the way. We can focus on core CPI. Mark, you're going to say something. Yeah, so 0.15 for the month. That's top line CPI, and it's 2.9% your rear at this point? 2.8 something, don't help me to it, but you have 2.9.

2.8 something that got rounded up to 2.9. So we've got a two handle now. Right. And you said you were going to go to the core CPI, Corps is excluding food and energy, and that it was up also to the second significant digit. What was it? 0.17, so also rounded up to 2.

And a year-over-year basis, that's up? 3.2%. So a little bit lower than June, where it was 3.3. Right. Can I ask super core service inflation? That's the measure that Bernanke, excuse me, not Bernanke, Powell has called out, I got Bernanke on the mind, just talk to someone from Brookings.

Do you know that offhand? What that was, super core service? I don't. I started looking. Really? So you're not even, even the chair Powell is telling you to look at it and you don't even look at it. I've opted for, oh, then go ahead, Marissa. I've been doing core, so it excludes food and energy and shelter, I think, has become more informative, but by all means.

I think, I looked at it this morning. I don't quite remember, but I want to say it was up like 4.6% year-on-year or something like that. It's been coming in pretty significantly. You know, it's been dropping for the past like four months. So there was a little spike at the start of the year. I have a super poor service. Doesn't that exclude housing? It does, doesn't it?

Yes. So it excludes energy and housing. Yeah. And it's 4.6? It was in the 4s. Yeah. It was in the 4.6. Yeah.

Don't quote me on the 4.6, but it was in the force. It was in the fours. Okay. Yeah. Okay. But coming in. But coming in since February. Okay.

All right. I'll try to find it. So I guess the other way of looking. at it is so-called harmonized consumer price inflation, that would be the way I would prefer to look at it because I think that's more representative. That would exclude, it's everything excluding owner's equivalent rent, the implicit cost of owning your own home. Do you know what that number is? CPI X Shelter. So I haven't looked at the harmonized data yet, and they BLS stop putting out

core, harmonized core CPI. But if you just exclude shelter, both from CPI and, you know, And core CPI, growth is flat, and you're at 1.7% year over year, which is, which is the range we've been in for a while. So under two in that, you know, 1.6, 1.7 range. Okay. So you're, if you exclude rent of shelter and the owner's equivalent rent, which is the implicit cost of home ownership, you're saying, basically flat on the month and up 1.7% year over year. That's right. Okay. So it feels like- was up 4.7, by the way. Say it again?

Supercore is up 4.7 year over year. Yeah. Okay. All right. Well, so Matt, it's kind of just stepping back. What do you think? I mean, are we, is inflation low and stable? Is it back to Target?

What do you, how do you interpret it? I think that's really hard to argue otherwise that inflation is not low and stable. I like this look right now. So if you take the last six months and say, you know, project that as a annual rate, so a six-month annualized rate. Right. Or CPI, you're at 2.8 percent. Core CPI typically runs a few tenths of a percentage point above core PCE deflator.

So the measure that the Fed targets for their inflation target. So you hold that spread and you're there. I mean, you're certainly not in an area where policy seems to need to be more restrictive for any longer than it already has, given the progress that we've made. And I also would point to just the underlying components. You mentioned Shelter. Shelter drove the blind share of both the increase in headline CPI and Core CPI this month. It wasn't that it skyrocketed.

It was just the big component. And it rose, the CPI for Shelter rose about 0.4, so about 0.38%. And that was enough to move the needle for both measures. You know, as we've discussed multiple times, that's not certainly not indicative. of on the ground cost pressures and the kind of stuff the Fed needs to worry about. So I think it's extremely difficult at this point to argue that there's any kind of worrying, underlying inflation. Right, right. Okay. So what's your take? Any holes in what Matt is saying? No, I completely agree. I mean, I think we're firmly headed down and I don't think you can argue that

the Fed should wait any longer than they already have. Yeah, it's a good report. Just any surprises, to the two of you, any surprises, things that, I guess the increase in rent of shelter on the month was a little on the high side compared to our expectations? A little bit, but not a lot. I think it's June, there was this really welcome deceleration to 0.18 or so, the slowest, increase monthly increase for shelter in June. And it was really a question of is, okay, is that the new norm? Are we going to go back to kind of where we were? And it was the answer there is both.

It's an increase, it accelerated a bit, but July's increase is still lower than what we've seen most months in 2024. So the trend is still intact. Shelter and disinflation is happening, but it's not a perfectly smooth trail downward. So the only other item I focus on a lot is the vehicle market. So new and used vehicles continue to just outright depletion. New vehicle prices have fallen for nine of the past 10 months. They're down about a percent year every year. Used vehicles fell 2.3 percent this month, and that brings them to about 11 percent lower than a year ago. I think there's two dynamics there. I mean, vehicle sales, monthly vehicle sales aren't falling terribly. They're lower than what we expect the long run state will be. But, you

you have people seeing vehicle prices fall, and I think that's causing them to maybe sit on their hands and say, why catch a falling knife kind of analogy? And then you have the expectation that financing terms are set to improve too. So it's another, you know, why buy now type of psychological thing. And that's really weighing on vehicle prices. I talk with our expert in-house expert, Mike Brisson, he expects, you know, this will kind of, the deflation will slow.

we'll start to see kind of prices flattened out in the coming months, given what we know about like the wholesale market. But I have been surprised just how continuing those and how big some of those declines. So what you're saying is the demand for vehicles has been weak. And you're saying that's just people are waiting. They're waiting for interest rates to come down. They're waiting. They see the prices are falling.

They're just say, why not just wait another month or two see if I can get even a better deal? So they're just kind of holding off. It's kind of a deflationary, weirdly, given everything that's happened, we're talking about a deflationary psychology setting in in the auto industry. That's what you're saying. It is, and it's particularly salient because we have one car, and I just have never made the points of when do I go to a dealership and try to go buy a car. And it feels very real. When am I going to do it? Well, prices are following.

I'm just going to wait. And lending, financing terms, or Q2 is about 8.2 percent, I think. So that's going to go down. And, you know, if you can do it, if you work from home. Yeah, that makes sense. That makes a lot of sense. Chris, any perspective on this? Any push back on anything?

I agree with the overall assessment. There are these flies in the ointment, though, that are just annoyances like the owner's equivalent rent and the rent. I know we've kind of dismiss it as so it's moving in the right direction overall, but pops up or there's volatility here. But still, it's annoying that it doesn't. move closer to our expectation of a continued slowdown here. Yeah, I mean, the solace, I take those, I keep looking at so-called market rents.

I mean, whatever are actually people out there in the world paying in rent. And if you believe the data, you know, look at zillow or apartment.com, rents, market rents have, this is for someone, you know, moving to a new apartment. getting and paying rent. It's been flat, you know, for two years now, right? I believe, two years. Yeah, depending on which index you use. But yeah, it's certainly has decelerated dramatically.

Yeah. Well, no, no. Is it low up? Because I know apartment is list. Dot com is flat. Flat. Okay. But it's kind of very weak growth.

So, and that's ultimately what the, CPI for rent and CPI for homeowner, you know, the owner's equivalent rent are tied to, right? I mean, ultimately, they're tied to those rents. So if rents are flat, it's just, it's got to be a matter of time before the CPI measures go flat. No? Yeah, yeah. No, that's what I'm saying. I agree with it.

It's just, it's annoying. It's annoying. Yeah, so long. It's not occurring as quick. And because it's been such a long time that the rents have actually been down in the market. data. So you got that, you got the motor vehicle insurance that, you know, calls a lot of attention. It's a big number. What was that last month? That was up. That was up over 1%. Yeah, 1.2% in July. That's something like 18 or 19% year-over-year growth. Okay. Yeah, it's not a big part of the budget,

but the types of things that people respond to and react to. So, right, right. Well, the one, And I don't know the answer to this. Maybe you guys do. The one thing I noticed that surprised me, it kind of felt like anomaly, was medical CPI fell, right? Which seems odd in the context of, you know, the increases we've been getting in recent months and the labor cost pressures in the healthcare sector and everything else. Do you know, Matt, what caused that decline? It is the reason we were about six basis points high. And we expected another, as you said, it's been, crawling upwards, healthcare inflation. So it is surprising. We saw on the PPI that physician prices were flat, which was surprising. And it's, it sounds, you know, too granular. It's, it's an important

measure because it flows in through to the PCE deflator. So we forecast what the PCE deflator is going to do in a few weeks based off of a mismatch of CPI and PPI stuff. And so I watch it for that reason. It was surprising the underlying dynamics that are weighing on health care prices in a given month, I think are tough, but it certainly was unexpected. It explains our forecast missed almost entirely. Okay. Oh, sorry, go ahead and versa. The components that fell within medical care were hospitals and health insurance costs. Yeah. They fell month over month. Yeah. Yeah. I don't get it. That's not right. Well, you know, the deeper we, the deeper we dig into the these numbers, the more stuff like this, you know, just, we used to call them gremlins.

And the way that the way they collect data on any kind of insurance, I think something like auto insurance is much more straightforward, but healthcare insurance, it's really complicated. There's huge, right, government contracts that get signed and that's happened at certain times of the year. There's all kinds of time. I think they're actually looking at the earnings of the health insurance companies to do it. That's right. Yeah.

So it's one of these implied prices, like the way they measure owner's equivalent rent, right? So it's complicated and you see it jump around a lot. Right. Right. So, Matt, we now have the CPI. We have the PPI, and they all go into calculating the consumer expenditure deflator. And, of course, it is the consumer expenditure deflator. And of course, it is the consumer expenditure deflator that the Federal Reserve targets.

The 2% inflation target is off the so-called PCE deflator. Do you have a sense of, you know, what that's going to be now for the month? Because that's going to come out, I think, next week, isn't it? That'll be the week after. Following weeks of the last week after. Yeah. So we are at, for the headline PC deflator would be 0.18% growth month over month. And that would actually, just given base effects, would lift the year-over-year rate from 2.5 to 2.6%.

And core PC deflator would we have right now as 0.16% month-over-month-over-months. So round it up to 0.2. And that would also, based off of last July, which was a decline, so now we're comparing unfavorably to a year ago, that would also lift the year-over-year rate from 2.6 to 2.7 for the core PC. Okay. So the kind of the benchmark inflation measure, the consumer expenditure later, we're at two point, well, with this data, assuming it sticks to script, 2.6%. So we're still elevated to the 2% target. But again, just to make the point over and over again, excluding owners equivalent rent, we're well below two. I think we're at 1-7, right? That's right. And even that forecast, just to ignore the base effects, if you just took that monthly growth that were forecasting and projected it throughout a year, you'd be at exactly 2%. Oh, that's right. That's good point.

Take the 0.18% month over month, annualize it. You're at target. Right. Yeah. Okay. All right. I want to play the game, but there was one issue that has come up that I was curious in your views. And that's around this idea of price gouging. you know, obviously this goes to the presidential election. And one thing that's loud and clear is that many Americans are, you know, obviously very upset by the higher prices they're paying. Inflation is moderating. It's coming into Target.

That's all great. But that doesn't, they're still paying, people are still paying a lot more for what they were, what they're buying compared to, you know, three years ago, before inflation took off. that would include groceries. And as you said, groceries are basically prices have gone nowhere over the past year, but they're still up 20, 25% from where they were, say, three years ago,

maybe a little over three years ago now. Rent, same deal. You know, they've, as we were just talking about, they've gone flat for a couple years, but they're still up 20, 25% from where they were three years ago. Gas prices, they're a bit elevated. They've come down quite a bit from where they were,

but they're still a bit elevated. So the kind of the staples, you know, people are upset about the fact that they're paying a lot more for it. And, of course, when you're in the heat of a presidential campaign, people are assessing blame. And one of the things that looks like resonates with the voter, with the people in general, is the explanation that they're getting gouged. unclear what that means, and maybe you guys can define that, but, you know, they're getting gouged. They're, the businesses are overcharging, taking advantage of the situation and over, of the pandemic and other things, and overcharging for those goods and services.

Let me turn to you, Chris. What is your sense of that? How do you, what do you think about that argument? I find it difficult to accept that at least on a broad basis. Yeah, you can find some isolated examples, but still a very competitive market. Sure, there are some more monopolistic areas, but I don't see this as a general trend. And I think a lot of the emphasis is on food. People are saying, well, the grocery stores are gouging.

And there again, I don't only see it. I think, you know, we can look at the underlying trends. Yeah, grocery, maybe they're not as many grocery stores as there used to be, but it's still pretty competitive. At least in my own anecdotal evidence, it seems like they still compete pretty aggressively. So I don't see it. I think it's just trying to assess blame to a difficult situation. Yeah. Yeah.

Marissa, do you have a different perspective on that? I think it's, you're bringing this up because Vice President Harris put out some points about her economic. This has been ongoing. Yeah. I mean, that's the most recent. Yeah. And one of the things in that was that she was going to go after corporations that are gouging, specifically on food, right? But there's no definition.

We've been talking about gouging for quite some time. And it's, you know. Yes. I mean, this has been an ongoing thing through the whole pandemic. right, is these accusations that companies are taking advantage of the high inflation environment and supply chain disruptions and shortages and taking advantage of that situation. And I agree with Chris. I mean, I'm sure that that you can find cases where that is true.

But I think to assign that as a major factor in the inflation we've seen over the past few years, I disagree with that. Okay. I guess another point, and I think you're alluding to this, what is the definition? What is the fine line between, you know, just supply and demand, you know, clearing the market, surge pricing in Uber, and actual gouging. What is that? It's a bit subjective in my opinion, so. Right.

Well, I'm obviously sympathetic to what you say, but here's one fact. If you look at profit margins, economy-wide, if I go look in national income product account data, this is the GDP data. The whole shoot match, all companies publicly traded privately held, and look at their profitability, you know, look at corporate profits relative to, you know, corporate GDP or any other marriage you want to look at. Margins are, they jumped during the pandemic when the pandemic hit, and they remain very high, you know, very consistent with the highest they've been in the data that we have back to World War II. Does that change your mind at all? So how does that fit into the narrative that, you know, businesses, and gouging has a pejorative kind of connotation to it. Let's not call it gouging, but they're taking advantage of the market dynamics,

and they have these very wide margins. Or maybe it's not even that. Maybe it's just a commentary on the fact that there's just less competitive pressure in many of these industries. that industries have consolidated. You know, larger companies are dominating these industries in an increasing a number of cases. And without the competition, you just, they're able to maintain these margins. I wouldn't call that gouging, but that's certainly not a well-functioning market economy.

Yeah, I'd say that's the more relevant question, right? Is there lack of competition? Do we have more monopolistic behavior going on? But the profit margin, they could be affected. by all sorts of things, right? Right. Companies were able to borrow very cheaply, right? So their cost of capital went down for a while, right?

So I don't know if you can just point at the profit margin and suggest that, oh, this must mean that they are taking advantage of the market. Right. And again, I don't know if the consumer's demand has shifted during the pandemic all of a sudden you did have people more willing to pay higher prices. Is that gouging? Is that what's the fine line or the definition that you? Yeah.

No, I hear you. I guess I would say, and again, I'm on board with what you're saying, but I do think there are probably cases, industries where shining a bright light on the pricing practices, you know, not a bad idea to try to, you know, create transparency with regard to pricing to make sure that, you know, people. are able to shop and, you know, go to the lowest price provider so that it creates more competitive pressures and get the, get those, those prices down relative to cost. Is that, yeah, that absolutely. That absolutely. And pharmaceutical, I think we just alluded to. Pharmaceutical.

That's a great example where it, yeah, so difficult to figure out what the actual price is of a, of a drug and more. Some food items, too, I think, you know, there's, you know, I don't want to name name, because I don't follow this closely enough to do that. But there are some industries where it does feel like pricing practices have been just it's not consistent with a highly competitive market. No? Yeah, I mean, I can think of several industries. And some of which the current administration has gone after through the FTC, right,

to look at their pricing practices and mergers and monopolistic. power in some of these industries where you can certainly point to a few. I'm not going to also name a name of a company, but where like they're the only player and the government is looking into that. I think that's probably the easier way to do this. And this is part of her proposal, by the way, Vice President Harris's proposal is to empower the FTC to look into anti-competitive practices more. That's easier to define. I bet than than what price gouging actually is. What about, she also,

Vice President Harris also brought this up in her proposal, was around a lot of the focus on affordable housing. She talked about, you know, the investors coming in, a lot of private equity firms, institutional investors coming in and buying up homes and renting them. So, you know, these were homes that were for sale.

They were people were homeowners in these. homes and they were bought out by these firms or could also be distressed properties where the private equity firm came in and bought the distressed property and is now rehabbed and renovated and is now renting it. And that's taking housing out of the stock of homes that are for sale and putting it in for rent. And then also using various rent pricing practices to push up rents. Chris, you're the housing expert.

How big a deal is that? In certain markets, I think again, we're taking a closer look where those firms may dominate, but overall they are very small share of the total housing stock in terms of ownership. So hard to believe again that they have that much effect on the overall statistics. But certainly, again, there are markets where you do see quite a bit of concentration. Yeah. There are also some counter arguments you could make that you mentioned the distressed properties during the housing crisis.

If you didn't have that private capital coming in, you just wouldn't have had perhaps as much housing stock at all, right? You'd have abandoned properties or certainly taking longer to clear. So not to this defend the private institutional investors, but they do provide a service as well. taking advantage of people. Yeah, yeah, okay. I guess on that one,

the only thing I would want to make sure of is that the, that homeowners have the same tax kind of benefits that a private equity investor has. You know, one thing I worry about is investors are able to take advantage of the, or use the tax code to their advantage

and makes it more economically viable for them to own the home as compared to, you know, a typical household, you know, with the tax benefits they have. I think that's, and I think that's part of her proposal is to remove some of the tax benefits that large investors get for buying up a bunch of homes. Right, right. Well, you can see, I mean, they're focused on things that, the necessities that people need to buy, right?

I mean, food, rent, on the energy side, gas, that's, I know there's been a lot of talk about big oil taking advantage. But there it's harder to identify, you know, it doesn't feel like the spread between the price of oil and what we're paying at the gas pump is inordinately high. It doesn't feel that way, at least to me. But so it sounds like price gouging is not the right way to think about it, but price competition is,

and anything that the government can do to facilitate, facilitate that competition all for it. Yeah, bring it on. Yeah. Okay. But at the end of the day, it's not that big a deal. It's not that, you know, if you, if I ask you to give me a list of the reasons why inflation was such a problem two, three years ago and why it's abated, it has, that would not be on the list or it would be at the bottom of the list. Right.

Yeah. Yeah. Yeah. Okay. Overall, certainly. What's that? Overall, certainly. Right.

Again, you could always go to specifics, specific. specific products, specific markets, and find examples. But overall, inflation, no, it's not. Right, right. Okay. While we're on the topic, the other argument you often hear, because this is political season, and I guess we'll be talking more about, you know, what the candidates are saying.

But the other argument you hear proffered for why inflation has been such an issue is fiscal policy. You know, it goes to all the support. that has been provided to the economy since the pandemic hit. And, you know, obviously this has been a charge leveled against the Biden administration, the American Rescue Plan back in March of 21. And then there's been the infrastructure legislation, the Chips Act, the Inflation Reduction Act. And, you know, that's led to more investment in the economy, more government spending that's gone into the economy.

And that that's a fundamental reason for the high inflation. So it's a demand side argument that this is juiced up demand and thus create inflationary pressures. Marissel, I go to you first. What do you think of that argument? Is it on your list? It would be on the list, but it would be low on the list. And I think it's no longer something that I think is affecting inflation. Maybe initially it had some effect, but I think that effect is largely worn off.

And I think we can see that when we look at excess saving. We know that there's a lot still out there, but it's sitting with a very small slice of the population at the upper end of the income distribution. And they're not really spending it, right? It's kind of just sitting there and being very, very slowly drawn down for low income and middle income households. It's gone for some of those slices or there's very little left. So I think if it had an impact, I think it was early on. And but I also think it was, you know, a lot of that was warranted. And it wasn't all under the Biden administration either.

I mean, there was a lot of stimulus sold out under the Trump administration when the pandemic first started. There were direct checks to house, two rounds of direct checks to households, I believe, while Trump was in office. So the stimulus started under that administration. And that offset what could have been a. much more catastrophic and long-lingering recession, I believe, than we got. So I think it's worth discussing and talking about, but I don't think it's a major cause of inflation beyond, let's say, you know, 2022. So it's on the list, but at the towards the bottom of the list, Matt, different view,

same view? No disagreement. It's a factor. But I think if you had today's CPI chart, it could show it to somebody. in 2022. I don't think they would argue that it was a transitory bout of inflation in the aftermath. And it's a bad word, I know. But I mean, that's what it looked like. It was people rushing from the Home Depot, then to vacation and just a major labor market imbalances as those things got sorted out. Price is, you know, price growth, cool significantly. So you're saying it was

transitory? I do. I say it is, yeah. You say it's transitory. Right. When we look back in history, we look at this bump. It's going to say, oh, that was tax. temporary. Yes. And it was due to the pandemic and Russian war largely, the supply shocks that we suffer. Yeah. Majority. Okay. Pretty a different perspective? Same? I'd push it a little higher on the list. I don't want to... You put it in the middle of the list? Yeah, just below the supply shocks themselves, right? So I do agree that the supply shock certainly were the more important factors here, but I don't think we can discount the impact. What about now? Is it, are they driving inflation now? I don't see it as driving inflation upward now, and we're seeing, you know,

deflation coming in, but if we think about the level, right, that inflation push the levels up and it's now, we're not pushing levels back down, right, after this ballot, either. And are you mostly focused on the American Rescue Plan or the whole, because the other plans, they were all roughly paid for, right? I mean, they were deficit neutral, so they shouldn't, at least in theory. In fact, their supply. side benefits to those more infrastructure, better infrastructure, you know, better supply change. No, it is the American Rescue.

It was the ARP. Can I say, though, back on the ARP, that was March of 21, right? So quite some time ago. And at that time, inflation was, you know, deemed to be too low, you know, leading up to that. I mean, for a long time between the financial crisis and the pandemic. And, you know, here we were, inflation was above target, you know, pushed up the price level. But, you know, that was a lot of.

even on the radar screen as an issue back then because, you know, the Fed had been calling for inflation above target because we had been below target for so long. So was that really, I mean, is that a something to be, a reason to end inflation on the ARP, the American Rescue Plan? I can't say I can't say that it has to have poured gas on the fire, right? If you have the supply constraints. So it was good gas. It was, it was, well, deemed you maybe the first part was good. Well, let me, let me put it this way.

We had the ARP and pushed inflation up. If there was no Russian war, life goes on, we wouldn't even be talking about inflation. It would not be an issue. Most likely, yeah. It may have pushed it up above the target for a while. Okay. Right. All right.

Okay. All right. Well, you know my view. I think it's the supply shocks, the pandemic Russian world. Tip-de-top. dippity top. I would put the price gouging, the ARP fiscal stimulus. I'd put it on the list.

I think, you know, but very low on the list, very low on the list. Anyway, we're going to keep this short. I got to catch a train, I should say, and we didn't play the game. Did you guys have statistics? You wanted to, should we play one, two rounds of the game and call it quits? Or should we just call it quits? Want to play a couple rounds? Whatever you have time for, Mark.

All right, let's play a couple rounds. The game, the stats game, before a statistic, and we're going to only do Marissa and Matt. Oh, that's good. Yeah, sorry, sorry. Bill very special. Yeah, unless you have a really good one. And, you know, you want to, we're going to figure out your stat from clues,

deductory reasoning questions, and we want a stat that's not so easy. We get it quickly, not so hard. we get it. And, you know, play fair. That's all I'm saying. Just play fair. All right, Marissa, you're up. Okay. This is extremely relevant to the conversation we've been having. Ooh. So I'm going to give you two numbers and you tell me what they are. 25.2% and 1%. Inflation related. Yes.

CPI? Change of prices since 2020? The first number that I gave you is the change in price since February 2020. Price of what? Food at home? Yes. Oh, there you go. Okay.

Broceries are up 25% since the pandemic kit. That's right. And that compares to 20.2% on the CPI if you take out food. So 5% more inflation. than everything else in the CPI basket. What's the 1%? That's the last year. That's true, it is, but that's not what I was thinking.

What do you mean? Is it not food inflation, groceries over the past year? No, that's not. No, something else. I mean, you're correct. It is up 1.1% over the past year, but that's not what the statistic is. It just happens to be the same. Is it inflation for some item?

Yeah. Oh, okay. Okay. So it's not, I meant, it's not groceries. It is groceries. Oh, okay. But it's not over the past year. Oh, it's all right.

Oh, I thought it was. Although it is, I mean, it is. But this is another period. This is another period. Oh, another period. not it is over the past year, but it's not over the past year. It's another period. Matt, can you decipher what she's saying?

No, I can't. You tell. Okay. It's food inflation. Okay. The first statistic was over the past four years, 25.2%. Right. This is food inflation 1.0% over what period?

Over the past year is incorrect. Oh, okay. Okay, really? Over past two years? No. In 2024? 2024? Yeah, I don't know.

I don't know. In 2019. Four years prior to the pandemic. Oh, okay, that's fair. Okay. All right. That's a good one. Yeah.

So, and I brought this up because of this whole price gouging. Yes. Talk because, yes, grocery, because the Harris administration, you know, hoped to be Harris administration is putting forward this price gouge. policy specifically for food, specifically for groceries, right? And as we just said, prices are up a lot since the pandemic. But if you go back and you look at, well, what did grocery prices used to do before the pandemic? It was kind of nothing, right? It was like they were up 1% in a four-year period between 2016 and 2020. So it just, to me, that really fuels the argument of

This was a very special period where we had the Russian War supply chain, you know, all of these sorts of inputs into food. We know that these are things that the administration can't control, right? They're not going to control global oil prices, the price of diesel, the price of a lot of the commodities that go into food. So I think this proposal for controlling grocery prices is going to be really difficult. That was a good one. Yeah, sorry to make fun of you.

No, I understand the confusion because you're right. It is up 1% over the last year. Yeah, yeah. But that was a good one. So it was really, it was up in the four years prior to the pandemic. Yeah. From February 16 to February 2020, grocery prices were only up by 1% over that time period. Wow.

There's basically no flat. They were flat. In a four year period, right? That's incredible. That's incredible. Hey, Matt, you want to go real quick? Sure. 18.

CPI related? Yes. Per cent? Not a percent. Is it, it's not in the CPI? No, but it's derived from the CPI. Months, did you just say, Chris? Months, yeah.

Yeah, nice. Yes. Oh, okay. That's all, that's it, Matt. That's it. That's it. You just come with a month. One.

18 months. how long it takes to something or purchase a car? The last time something happened? Yeah, yeah. Okay. Last time something what happened? Something definitely happened. 18 months ago?

18 months ago. Oh, 18 months ago. That's early 23, right? Yeah, yeah. When was that? December, early 2023. early 2023. What kinds of this train?

Should I push this along? Yeah, go ahead. It's very, very related to what Mercer was just saying. 18 months is the number of months in a row that average hourly earnings have risen faster than food at home prices. Oh. Oh, wow. Yeah.

We never get that. Yeah, but last week, listening last week, they were way too easy. So I committed this time to be like, okay, I mean... Well, you did it. Good job on that one, Matt. So that's very aprop. I mean, everything Mercer just explained. But also a lot of people complain about necessities and inflation there.

Don't dismiss that, but wages are growing as well. And if you look at non-supervisory workers, so average hourly earnings for, you know, kind of middle income type of jobs, they're up more since 2019, late 2019 than food. So grocery short prices. So that's something moving in the right direction. Still painful. but the kind of thing that's improving very good that was very good well i'm going to go catch that train so we're going to call this quits sorry about that chris uh we'll we'll catch you next time it was a

great statistic it was great yeah two great statistics uh and with that dear listener uh we're going to call this a podcast to talk to you next week take care now