TL(PM) DIGEST: Nevertheless, inflation persisted

[Celerity]

The changing face of inflation

https://www.liberalpatriot.com/i/117869738/the-changing-face-of-inflation

What happened? Economic growth slowed to 1.1 percent in the first quarter of fiscal year 2023, while wages grew at a healthy annual clip of 5.1 percent. Inflation continued its glacial retreat, but remained persistent with prices rising at an annual rate of 4.2 percent. But the underlying drivers of inflation have changed: services—not goods, food, or energy—accounted for most of last quarter’s price increases, and inflation itself no longer appears to be cancelling out wage increases.

Why does it matter? No one likes to pay more for the same goods and services, but public discontent with the state of the economy and concerns about inflation have more to do with the fact that inflation exceeded wage growth over the past two years—many Americans have been taking home more pay, yes, but not enough to keep up with rising prices. That gap seems to have closed in the recent data, but it remains to be seen whether or how long it will take for this new economic reality to affect ordinary Americans.

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TLP’s take: Economic data continues to give policymakers and ordinary Americans mixed messages when it comes to employment, inflation, and overall economic growth. But this recent release suggests that Federal Reserve’s strategy to cool off the economy without risking a major recession is working, albeit not as quickly as many of us would like.