Global economies are lowering inflation while avoiding serious recession -- but US stands out.
By Curt_Anderson February 2, 2024 8:45 pm Category: Food & Beverages (0.0 from 0 votes)
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One reason for U.S. resilience: fiscal policy.
Part of the reason that economic growth has been so surprisingly strong in the United States is simple: The American government has continued to spend a lot of money.
Government expenditures as a share of overall output hovered around 35 percent in America in the years leading up to the pandemic, based on I.M.F. data. But in 2020 and 2021, they jumped above 40 percent as the government responded to the coronavirus with about $5 trillion in relief and stimulus to people, businesses, institutions, and state and local governments.
Both states and households have only slowly spent down the savings they amassed during those pandemic years, so the money has continued to trickle through the economy like a slow-release booster shot. On top of that, government spending has remained elevated as the Biden administration has begun to make sweeping infrastructure and climate investments.
Inflation has fallen. Why are groceries still so expensive?
Grocery prices have jumped by 25 percent over the past four years, outpacing overall inflation of 19 percent during the same period. And while prices of appliances, smartphones and a smattering of other goods have declined, groceries got slightly more expensive last year, with particularly sharp jumps for beef, sugar and juice, among other items.
[There] is no immediate fix for policymakers. Grocery prices remain elevated due to a mixture of labor shortages tied to the pandemic, ongoing supply chain disruptions, droughts, avian flu and other factors far beyond the administration’s control. Robust consumer demand has also fueled a shift to more expensive groceries, and consolidation in the industry gives large chains the ability to keep prices high, economic policy experts say.
Not all the news is bad. The rate of growth for grocery prices substantially cooled last year, falling to 1.3 percent from 11.8 percent the year before.
Our biased perceptions of inflation
Grocery prices tend to play an outsize role in peoples’ perceptions of inflation. Unlike more infrequent expenses — car insurance, say, or property taxes — that might deliver a similar dose of sticker shock, the sheer frequency of grocery trips makes price increases harder to swallow, said Ross Steinman, a psychology professor at Widener University who studies consumer behavior. “When you’re buying a carton of eggs or a gallon of milk every week, it’s staring you right in the face over and over,” he said.
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One reason for U.S. resilience: fiscal policy.
