The wild ride of pandemic consumer prices
- Felix Salmon, author of Axios Markets
Consumer prices have been more volatile over the past year than at any point in decades — for good reason.
Why it matters: Congress has tasked the Federal Reserve with ensuring price stability when it comes to consumer prices overall. But the price of a broad basket of goods and services can be pretty steady even if the various components inside that basket are gyrating wildly.
The big picture: It's impossible to have shutdowns, shortages, and a massive reconfiguration of the global economy without significant price disruption, which is exactly what we've seen over the past year.
The intrigue: Because of the complexity of the economy, some of the disruptions can be counterintuitive or unexpected.
- While the price of pork chops has risen by 11% since January, the price of ham has been flat. And while bananas have fallen in price by 1.3%, fresh fruit excluding bananas, apples and citrus has risen by over 11%.
- The price of car and truck rentals has had a particularly striking trajectory, falling by 23% between January and May of 2020, and then rising by 61% between May 2020 and March 2021 — for an overall rise of 24%.
The bottom line: There's no indication that price volatility is over. Many of the biggest price moves have taken place in the most recent months.