Mar 16, 2024 - Economy

This chart explains why inflation felt so bad

Data: Bureau of Labor Statistics via FRED; Note: Year-on-year inflation in the gasoline, food at home, and rent of primary residence components of CPI; Chart: Axios Visuals
Data: Bureau of Labor Statistics via FRED; Note: Year-on-year inflation in the gasoline, food at home, and rent of primary residence components of CPI; Chart: Axios Visuals

Inflation is a term that means very different things depending on whether you're talking to an economist or just a normal American.

Why it matters: If you look at the prices that are top of mind for regular folks, inflation turns out to have been astonishingly high in mid-2022 — far higher than the headline Consumer Price Index. Now, however, it's at a very benign 2%.

How it works: Axios took the three most salient prices in the U.S. economy — gasoline, food at home (i.e. groceries), and rent. We weighted them according to their weight in the CPI, and charted how they've changed since 2017.

The big picture: Ultra-broad measures of inflation like PCE or the GDP deflator tend to be of interest mostly to macroeconomists. The most well-known measure of inflation, CPI, is more focused on things individuals spend money on, from window coverings and indoor plants to airline fares and postage stamps.

  • However, when most people think or talk about inflation, they tend to concentrate on a much smaller group of super-salient prices.

Follow the money: The most salient prices are big enough to be meaningful in the context of a family budget; seen and thought about frequently; and paid out on a regular basis, ensuring that any increases get felt almost immediately.

For our chart, Axios chose three prices in particular.

  • Gas prices were a no-brainer: They're the most visible price in the country, flashed at drivers in neon-green two-foot-high numbers on every car journey.
  • Grocery costs have been driving much of the discourse around inflation in the past couple of years, and are something that affects every family.
  • Rent is less universal — most Americans own their homes, rather than renting — but is overwhelmingly important to almost everybody who pays it. It's also a very large part of the reason why the cost of housing is so political.

By the numbers: The gas-food-lodging inflation chart spiked to an astonishing 18% in June 2022, and then briefly turned negative a year later as gas prices came down fast.

  • The peak in gas-food-lodging inflation was double the 9% peak in headline CPI.
  • This time last year, it was still above 7%, but since then it's been much lower.
  • The series is volatile, but since mid-2023 it has hovered at decidedly unworrying levels. In February it came in at a benign 2%.

The bottom line: We're reaching the point at which Americans are becoming accustomed to higher — but no longer sharply rising — prices. That's the point at which inflation worries tend to dissipate.

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