Consumer price index rose 19% since 2021, reducing real incomes

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As the dust settles on the latest economic data, one thing is abundantly clear: inflation isn’t showing any signs of backing down, and the consequences are hitting people hard. Despite the Fed’s hopes for a return to normalcy, the reality on the ground tells a different story.

According to Mish Shedlock, the latest figures from the BEA paint a bleak picture. While personal income saw a modest increase, real income actually took a hit in February. Meanwhile, personal spending surged, driving up prices even further. Inflation, though largely expected, remains stubbornly high, far beyond the Fed’s comfort zone.

The numbers speak for themselves: a 0.3 percent increase in the PCE price index, excluding food and energy, is hardly cause for celebration. Real DPI dipped by 0.1 percent, indicating that people’s purchasing power is eroding.

Despite the Fed’s target of 2.0 percent inflation, the current trajectory falls woefully short. With inflation running at 0.3 percent per month, annualized figures paint a grim picture of sustained price hikes. Mish Shedlock’s analysis leaves little room for optimism, suggesting that the Fed’s hopes for a return to normalcy are misplaced.

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If we had “normal” inflation since January 2021, total consumer price index inflation would be 6% today. However, it is at 19%, a 13% deviation from the expected norm, signaling significant real-world consequences.

Consider this: a $100k salary in 2021 now holds the purchasing power of just $87k. It’s a stark reminder of the erosion of wealth that inflation brings, leaving individuals and families grappling with the harsh reality of diminished incomes and heightened financial strain.

As Fed Chair Powell grapples with the realities on the ground during his visit to San Francisco, the stark reality of price shocks and dwindling purchasing power may serve as a sobering wake-up call. Inflation isn’t just a number on a screen—it’s a tangible hardship for millions of Americans. If the current trends persist, the toll on households’ financial well-being will only deepen, leaving many struggling to make ends meet in the face of soaring prices.

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