“Zero” Percent Inflation?

James F. Gauss, Ph.D.

August 12, 2022

“I want to say a word about news that came out today relative to the economy. Actually, I just want to say a number: zero,” President Biden proclaimed yesterday, after the Bureau of Labor Statistics released the July CPI data.   “Today we received news that our economy had zero percent inflation in the month of July.”

Really, Mr. President?  While technically Mr. Biden is correct, there was no INCREASE in inflation in July, the real story in the numbers is far from “zero.” So, let us take a look at the real numbers behind the “zero” where most people live.

Overall, year-to-year inflation is still at a stubborn 8.5%, just a tad below May’s number of 8.6%. 

While Biden and his transportation czar, Mr. Buttigieg, are blowing their horn about the recent decrease in gasoline prices, the truth is, they are still 44% higher than last July.  Not exactly something to celebrate. The real reason gasoline prices have declined is that Americans are driving less—far less.  According to a recent AAA survey, 88% of American drivers are driving less due to high fuel prices; 74% are combining errands to reduce mileage; 56% have reduced their shopping or dining out experiences, and 29% have postponed their vacations for 2022.  Such a drastic reduction in miles driven are the real reasons that gasoline prices have dropped significantly, not because of anything Biden or his administration have done to improve the economy.

Photo credit: AAA

So, if Americans are driving less, but presumably still driving to work and church, what is really impacting their lifestyle?  Especially those among the financially stressed lower and middle class of the nation.

What are the real numbers behind Biden’s “zero” proclamation?  Food for home consumption was up 10.9% in July, and increase over May’s 10.1%.  Within the food budget, two sources of “cheap” protein, eggs and chicken, were up 38% and 16.6%, respectively.  Milk was up 15.6%, potatoes 13.3%, rice 12.7%, fresh fruits and vegetables 8.2%.  This is having a dramatic and negative impact on the grocery bills and nutrition of economically stressed individuals and families nationwide.  Food shelves throughout the nation are sounding a loud alarm that their participant loads are skyrocketing, but their food resources are plummeting.  Certainly, any victory lap on inflation is grossly premature by the current administration.

In addition to the ever rising food costs, those that can least afford the consequences of inflation, are being clobbered with escalating energy, rent, and transportation costs.  In July, overall energy services costs were up 18.8% and transportation, 9.2%.  Electricity, which every person uses, was up 15.2%.  Fuel oil and natural gas were up a whopping 75.6% and 30.5%, respectively year-to-year, and the heating season has not yet commenced. 

Apartment rent has risen sharply.  On June 2, Apartment List National Rent Report indicated that year-over-year rent increases were averaging 15.3%.  Adding rental housing on to food, transportation, energy and other associated cost increases, the low to moderate income folks and those on a fixed income are getting hammered like never before.  The 5.9% COLA for Social Security beneficiaries for 2022 has become a “spit in the bucket” joke.

As during most periods of economic stress, consumers borrow more, usually through their credit cards.  According to the Federal Reserve Bank of New York, American consumers piled on $312 billion in new debt in the second quarter of 2022, pushing total household debt to a record $16.15 trillion. Although the majority of the new debt, $11.39 trillion, was in home mortgages, the total indebtedness is flashing warning signs.

In the second quarter, credit card debt soared by $46 billion, a 13% rise year-over-year.  Increasing one’s debt load during rising interest rates is never a good idea.  Unfortunately, those that pile on credit card debt are those least likely to be able to pay it off in a reasonable time period, and therefore compound their economic crisis.

“Zero” inflation, President Biden?  Dream on!

Also Read:

Is Jeremiah’s Lament America’s?

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