Economy

Economists expect inflation rose 1.1% in March from the prior month, but the year-over-year gain is expected to be 8.4%, the highest since December 1981.
The consumer price index will be reported Tuesday at 8:30 a.m. ET.
The main culprits behind the jump in headline inflation were food and energy, but the cost of housing has continued to rise.
“It’s going to be ugly,” said one economist of the March report. “It’s a perfect storm.”

A customer selects food from a freezer at a supermarket on January 12, 2022 in New York City.
Liao Pan | China News Service | Getty Images

Consumer price inflation in March is expected to have spiked the most since December 1981, driven by higher food costs, rising rents and runaway energy prices.
The consumer price index will be released Tuesday at 8:30 a.m. ET, and economists expect a monthly jump of 1.1% and a year-over-year gain of 8.4%, according to Dow Jones. That compares with February’s increase of 0.8%, or 7.9% year over year, the highest since early 1982.

“It’s going to be ugly,” said Mark Zandi, chief economist at Moody’s Analytics. “It’s a perfect storm — Russian invasion, surging oil prices, China locking down, further disruptions to supply chains, wage growth accelerating, unfilled positions. Just a kind of scrambled mess leading to painfully high inflation. We’re struggling through two massive global supply shocks. It would be hard to imagine we didn’t suffer higher inflation.”
Core inflation, excluding food and energy, is expected to rise a half percent — the same as February — with a year-over-year gain of 6.6%, up from 6.4%, according to Dow Jones.
“The good news is it does look like it will be the peak because of oil prices,” said Diane Swonk, chief economist at Grant Thornton. Oil prices surged shortly after Russia invaded Ukraine in late February, reaching a high for West Texas Intermediate oil futures of $130.50 per barrel in early March. That price has fallen to about $94 per barrel Monday.
Gasoline prices also surged, reaching a national average of $4.33 per gallon of unleaded on March 11, according to AAA. That price Monday was $4.11 per gallon.
“The problem for the Fed is the broadening of inflation from goods into services and also because used car prices might be picking up again,” said Swonk. “The supply chain issues aren’t going away. They’re getting worse.”

Just on base effects, economists say this month or next month could be the peak for inflation. Zandi projects headline CPI will fall to 4.9% by the end of this year.
The Federal Reserve is expected to tighten policy aggressively to rein in the hottest inflation in four decades. Markets expect a half-point hike in May, and economists say a hot inflation report could also bring a half-point hike in June.
“The Fed’s on track. It’s at least a half-percent hike, and the balance sheet reductions starting out,” he said.

The Fed first raised interest rates by a quarter point in March, after cutting the fed funds target rate to zero in early 2020.
Tom Simons, money market economist at Jefferies, expects to see the Fed raise rates by 50 basis points at its May 3 meeting, and he said the CPI should not change that. “If it comes in dramatically higher than expected, which I don’t think it will, it’s going to start talk of a 75-basis-point hike, or an intermeeting hike,” he said. “That’s pretty much nonsense in my opinion.” A basis point equals 0.01%.
Simons said energy prices in CPI are expected to jump 18% in March. “That first half of March was particularly acute post-Russian invasion. Food prices are a similar story but not nearly to the same extent. … Housing again is going to be a pretty significant factor,” he said.
He expects owners’ equivalent rent, or the cost of a home in CPI, to rise about 0.5%, while rents should rise 0.6% month over month. Shelter costs are one area that is expected to keep rising. That would put shelter, which is a third of CPI, up 4.6% year over year.
Swonk said the increases to shelter costs are the highest since early 1990, and they could continue to rise. “I think there’s a risk it comes in on the hot side,” she said.

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The Biden administration is bracing for the Labor Department’s consumer price index report to show that inflation is “extraordinarily elevated.”
The consumer price index, or CPI, is one of Wall Street’s favorite ways to measure inflation. The CPI reading for March 2022 is due out Tuesday morning.
“We expect March CPI headline inflation to be extraordinarily elevated due to Putin’s price hike,” said White House press secretary Jen Psaki.
The February reading showed the benchmark index rose 7.9% over the last 12 months, the highest level since 1982.

White House press secretary Jen Psaki answers questions during the daily briefing on March 09, 2022 in Washington, DC. Psaki answered a range of questions related primarily to Russia’s invasion of Ukraine.
Win Mcnamee | Getty Images

WASHINGTON — The Biden administration is bracing for Tuesday’s key consumer inflation report to show that the prices Americans pay soared in March, as Russia’s assault on Ukraine caused energy prices to jump.
White House press secretary Jen Psaki said Monday that the Labor Department’s previous report — which showed prices rising at a dramatic rate in February — failed to include the majority of the jump in oil and gas costs caused by the Kremlin’s unprovoked invasion.

“We expect March CPI headline inflation to be extraordinarily elevated due to Putin’s price hike,” Psaki told reporters.

“We expect a large difference between core and headline inflation,” she continued, “reflecting the global disruptions in energy and food markets.”
The Bureau of Labor Statistics on Tuesday will issue its March update to the consumer price index, or CPI. The CPI is the department’s tool for measuring inflation in a basket of goods and services that the average American would buy — ranging from eggs and milk to cellphones and unleaded gasoline.
Economists consider two versions of the CPI data: The headline number that includes all prices consumers face, and a so-called core CPI that excludes often volatile food and energy price fluctuations.
The White House says it anticipates a wider-than-normal disparity between the headline and core readings because of an abnormal increase in gas prices that occurred last month. The price for a gallon of regular unleaded gasoline hit a record high of $4.33 on March 11, according to the American Automobile Association.

That price has since slid to $4.11 a gallon, according to AAA.
“At times, gas prices were more than one dollar above pre-invasion levels, so that roughly 25% increase in gas prices will drive tomorrow’s inflation reading,” Psaki said.
Labor Department data has for several months shown that year-over-year price jumps have been hitting levels not seen since Ronald Reagan was in the Oval Office. The February reading showed benchmark consumer inflation index rose 7.9% over the last 12 months, the highest level since January 1982.
The March report is due out on Tuesday at 8:30 a.m. ET.
The press secretary noted that President Joe Biden has taken several steps to help lower energy costs, including a move to release about 1 million barrels of oil a day from the nation’s Strategic Petroleum Reserve.

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On the final day of March, Biden blamed Russian President Vladimir Putin for the most recent spike in energy costs.
“Many people are no longer buying Russian oil around the world. I banned Russian-imported oil here in America, Republicans and Democrats in Congress called for it and support it. It was the right thing to do,” Biden said on March 31.
“But as I said at the time, it’s going to come with a cost,” the president added. “As Russian oil comes off the global market, supply of oil drops and prices are rising. Now Putin’s price hike is hitting Americans at the pump.”
Stalled legislation — key components of the president’s Build Back Better agenda — backed by the White House and congressional Democrats could also help cut child-care and health-care costs, Psaki added.

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Ukraine’s finance minister has made an appeal for immediate financial support of tens of billions of dollars to plug a gaping fiscal deficit caused by the Russian invasion.Government spending exceeded revenues by about $2.7bn in March and Ukraine expects the gap to expand to $5bn-$7bn a month in April and May because of the war. Ukraine’s gross domestic product was worth $164bn in 2021. “We are under great stress, in the very worst [financial] condition,” Sergii Marchenko said in an interview with the Financial Times. “Now it is a question of the survival of our country.”“If you want us to continue fighting this war, to win this war . . . then help us.” Marchenko painted a grim picture of the damage to Ukraine’s economy inflicted by Russia’s full-scale invasion in late February. Damage to civilian and military infrastructure was estimated at $270bn so far, he said, with nearly 7,000 residential buildings damaged or destroyed.

Though Ukraine has received significant military aid to help defend itself against Russia, the government wants its western partners to grant financial aid and to approve emergency lending from the IMF and World Bank. About 30 per cent of Ukrainian businesses had ceased all activities and 45 per cent were working at reduced capacity, he said. Electricity consumption was down 35 per cent. Trade had collapsed, with exports halving between February and March and imports falling by more than two-thirds. The Kyiv School of Economics on Monday estimated total economic losses from the war at up to $600bn.Marchenko demanded that Russia pay reparations for “the destruction of private and public property” during the war and said Kyiv had assembled an international legal team to lodge claims against Moscow.But the priority was short-term finance. As Ukraine tries to limit its budget shortfall, the government had already made spending cuts of more than $6bn, but it was not enough, the minister said.“We can cut some spending, but it can’t cover the gap,” he said. Sergii Marchenko, Ukraine’s finance minister: ‘A lot of politicians advise us to talk about [debt] restructuring but that is not our policy’ © Ministry of Finance of UkraineRevenues were running at just over half of the prewar level, he added. The budget deficit in 2022, forecast at 3.5 per cent of GDP before Russia’s invasion, would run to “many multiples” of that depending on the duration of the war, he said.The government continued to meet its core obligations of paying public-sector salaries and pensions and servicing its debts, he said. The country made a $292mn payment last month on a dollar-denominated eurobond maturing in September and would continue to meet its obligations to avoid default or restructuring, he added.“A lot of politicians advise us to talk about restructuring but that is not our policy,” he said. Ukraine wanted to be able to access both concessional and commercial financing, and to be able to continue to issue external debt. The government was in discussions with the US to secure guarantees to enable it to issue sovereign bonds at rates of interest below those currently demanded by the market, which were “far higher than optimal for us to borrow now”, he said.The IMF said on Friday that it had opened an account to channel grants and loans to Ukraine to help it “meet its balance of payments and budgetary needs and help stabilise its economy”. 

Marchenko called on rich countries to use the account to channel funds they received from the IMF last August, when it made a $650bn allocation of its special drawing rights or SDRs, a form of reserve asset that is the equivalent of newly minted money. The allocation was intended to help countries cope with the economic impact of coronavirus.Members of the G7 group of the world’s largest economies received about $290bn in the allocation shared among the IMF’s 190 member countries, roughly in line with their share of global output. Marchenko urged rich countries to donate or lend between 5 and 10 per cent of their allocations to Ukraine’s war effort through the new IMF account. “That allocation was not used, a lot of countries just parked it,” he said. “It is probably the easiest [form of support].”Last month, the US Congress approved $13.6bn in military and humanitarian aid to Ukraine and other countries affected by the war. While Marchenko welcomed this, he said Ukraine would “not receive a cent” as it would be provided in the form of direct aid rather than in cash. “This is not direct budgetary support. We cannot use it to fill the deficit,” he said. More

WASHINGTON (Reuters) – Sharply higher global food and energy prices due to the war in Ukraine are hitting poor countries, and better mechanisms for dealing with sovereign debt stress will be needed to stave off defaults, the IMF said on Monday.”The war in Ukraine is adding risks to unprecedented levels of public borrowing while the pandemic is still straining many government budgets,” Vitor Gaspar, director of the International Monetary Fund’s fiscal affairs department, and Ceyla Pazarbasioglu, the IMF’s strategy chief, wrote in a new blog.”With sovereign debt risks elevated and financial constraints back at the center of policy concerns, a global cooperative approach is necessary to reach an orderly resolution of debt problems and prevent unnecessary defaults.”Spikes in food and energy prices were hitting low-income countries particularly hard, and they may need more grants and highly concessional financing. Countries should undertake reforms to improve debt transparency and strengthen debt management policies to reduce risks.About 60% of low-income countries were already in, or at risk of, debt distress, the authors said. Rising interest rates in major economies could lead to widening spreads for countries with weaker fundamentals, making it more costly for them to borrow. The credit crunch was exacerbated by declining overseas lending from China, which is grappling with solvency concerns in the real-estate sector, COVID-19 lockdowns and problems with existing loans to developing countries, they said.Actions taken by major economies were insufficient, they said, noting that a freeze in official bilateral debt payments adopted at the start of the pandemic had ended, and no restructurings had been agreed under a framework set by the Group of 20 industrialized nations.Options were needed for a broader range of countries, now not yet eligible for debt relief.”Muddling through will amplify costs and risks to debtors, creditors and, more broadly, global stability and prosperity,” they wrote. “In the end, the impact will be most sharply felt by those households that can least afford it.” More

NEW YORK (Reuters) – A rally in U.S. credit markets after the U.S. Federal Reserve started hiking rates last month was short-lived and some corporate bonds hit new lows on Monday amid rising bond yields and concerns over the economic outlook.BlackRock’s iShares iBoxx $ High Yield Corporate Bond ETF – an exchange-traded fund which tracks the U.S. junk-bond market – fell 0.6% to trade at $79.76 a share on Monday, its lowest since May 2020.Its investment grade equivalent was also down sharply, by over 1%, hitting its lowest since March 2020.Corporate bonds have had a rough start to the year but credit spreads – the interest rate premium investors demand to hold corporate debt over safer U.S. Treasury bonds – tightened after the Fed hiked rates in March.That was in step with a stocks rally which was partly driven by investors comforted by more clarity on rate hikes and the Fed’s decisive action against surging inflation.However, lingering concerns over the impact of tighter monetary policies on corporate profits and borrowing costs, as well as the possibility of a sharp economic slowdown as the Fed tries to cool the economy, have started to pressure U.S. credit markets again this month.The Markit CDX North American Investment Grade Index, a basket of credit default swaps that serves as a gauge of credit risk, widened 6 basis points from the end of March to 72.843 basis points on Monday, as investors hedged bets on a deterioration in credit quality.”Economic conditions are evidencing some signs of perhaps slowing somewhat down”, said Mark Luschini, Chief Investment Strategist at Janney Montgomery Scott.”That can start to creep into widening credit spreads by way of investors taking perhaps a slightly more sober view about what are the conditions that are going to persist to allow those lower rated credits to continue to fund their debt financing”, he said. U.S. Treasury yields rose last week on the back of hawkish signals by the U.S. central bank – increasingly determined to tighten financial conditions through rate hikes and so-called quantitative tightening, a plan to reduce its balance sheet.On Monday, the benchmark 10-year U.S. Treasury yield rose to its highest level in more than three years as investors awaited key inflation data later this week to determine how hawkish the Fed will need to be on its policy path.”The combination of faster rate hikes along with quantitative tightening is, at least potentially, a cocktail for drawing the liquidity conditions that are best suited to promote high flying equity names as well as the risky components of the fixed income market, credit and lower rated credit in particular”, said Luschini. More

(Reuters) – There are early signs of a cooldown in some of the hottest corners of the U.S. housing market, Redfin (NASDAQ:RDFN) said in a report on Friday, a fresh indication that high house prices and rising mortgage rates are cutting into homebuyer demand. Among those early tells, according to Redfin: Google (NASDAQ:GOOGL) searches for “homes for sale” dropped by double digits in Baltimore, Boston, San Francisco and Los Angeles in the second week of March from a year earlier; tours of homes for sale in California were down 21% as of March 31 from the first week of 2022, data from ShowingTime shows; Redfin agents in San Francisco, Los Angeles, Washington DC, Boston and Seattle reported a drop in requests for homebuying help at the start of this year compared with last year, even as requests nationwide surged; and agents in California say they are seeing fewer offers on each home than previously. Home prices nationwide have risen about 35% in the two years since the COVID-19 pandemic slammed the nation and the Federal Reserve slashed short-term interest rates to near zero, the Zillow Home Value Index shows. The Fed last month began raising its policy rate to bring down decades-high inflation as the economy reopened, and longer-term borrowing costs have climbed swiftly in anticipation of more aggressive rate hikes ahead.The average interest rate on a 30-year-fixed mortgage, the most popular U.S. home loan, rose last week to 4.9%, a fresh three year high, data from the Mortgage Bankers Association (MBA) showed this week. The U.S. housing market is still hot, however, even in cooling California cities. The average home in Los Angeles, for instance, is sold for 5% over its asking price, with a record share selling within a week of listing, Redfin said. But the signs are there already, the report said, of a price slowdown in coming months. More

The Labor Department’s consumer price report on Tuesday would seal the case for the Federal Reserve to raise interest rates by a hefty 50 basis points next month. It would follow on the heels of data last month showing the unemployment rate dropping to a fresh two-year low of 3.6% in March. The U.S. central bank in March raised its policy interest rate by 25 basis points, the first hike in more than three years. Minutes of the policy meeting published last Wednesday appeared to set the stage for big rate increases down the road.”Inflation is reaching a crescendo because of not only what’s happening in Ukraine, but also what happened in the past, such as massive government stimulus and the Federal Reserve printing money,” said Sung Won Sohn, a finance and economics professor at Loyola Marymount University in Los Angeles. “We should expect a half a point rate increase next month.” The consumer price index likely surged 1.2% in March, according to a Reuters survey of economists. This would be the largest monthly gain since September 2005 and would follow a 0.8% advance in February. Gasoline prices on average soared to an all-time high of $4.33 per gallon in March, according to AAA.Though gasoline was likely the main driver of inflation last month, strong contributions were expected from food and services such as rental housing. Russia is the world’s second-largest crude oil exporter. The United States has banned imports of Russian oil, liquefied natural gas and coal as part of a range of sanctions against Moscow for its invasion of Ukraine.Russia and Ukraine are major exporters of commodities like wheat and sunflower oil. In addition to pushing up gasoline prices, the Russia-Ukraine war, now in its second month, has led to a global surge in food prices. High inflation readings and the Fed’s hawkish posture have left the bond market fearing a U.S. recession, though most economists expect the expansion will continue.In the 12 months through March, the CPI is forecast shooting up 8.4%. That would be the largest year-on-year gain since January 1982 and would follow a 7.9% jump in February. It would be the sixth straight month of annual CPI readings north of 6%.INFLATION PEAKING?Economists believe March would mark the peak in the annual CPI rate, but caution that inflation would remain well above the Fed’s 2% target at least through 2023. Gasoline prices have retreated from record highs, though still remain above $4 per gallon.Last year’s high inflation readings will also start falling from the CPI calculation.”However, inflation’s descent will remain painfully slow for consumers, businesses and policymakers alike,” said Sam Bullard, a senior economist at Wells Fargo (NYSE:WFC) in Charlotte, North Carolina. “Services inflation, which includes housing, shows no signs of abating anytime soon.” A moderation in prices of used cars and trucks likely resulted in a tame monthly underlying inflation reading.Excluding the volatile food and energy components, the CPI is forecast rising 0.5% after a similar advance in February. That would result in the so-called core CPI increasing by 6.6% in the 12 months through March, the largest advance since August 1982, after rising 6.4% in February.”Factors like used cars and unfavorable base effects could even cause an apparent slowing in core inflation for a few months this spring,” said Veronica Clark, an economist at Citigroup (NYSE:C) in New York. “This would likely be short lived, with further upside risks from higher commodity prices and supply disruptions materializing over the summer that could cause markets to reprice more hawkish expectations for the Fed.”Lockdowns in China to contain a resurgence in COVID-19 infections are seen putting more strain on global supply chains, which could keep goods prices elevated. Separately, rising rents for housing are also expected to keep core inflation hot. A key measure of rents, owners’ equivalent rent of primary residence, accelerated 4.3% on a year-on-year basis in February, the fastest since January 2007. Economists say this gauge tends to lag private sector measures of rents. While these measures have been showing signs of slowing, economists do not expect this to show in the CPI data for a while. Landlords slashed rents early in the pandemic as people deserted cities, but the reopening of the economy has boosted demand for accommodation. “The robust recovery in labor markets, rising labor incomes and healthy household balance sheets should prove supportive of rental demand even amid elevated prices, at least in the near term,” said Michael Pond, head of inflation research at Barclays (LON:BARC) in New York. “The peak in the CPI rents may still be at least a quarter away, but given the recent moderation in private measures of rents, we would caution against extending the trend of well above pre-pandemic levels into 2023.” More

Few areas of the country have seen inflation as bad as in the South, where prices have risen across the 16-state region by an average of 8.4% from a year ago.
But prices aren’t the only thing heating up in the South and West, as Georgia and Arizona voters find themselves in a fierce 2022 midterm election cycle.
Some residents say rising food, gasoline and housing costs are likely to play a factor in how they vote later this year.
The Labor Department’s March 2022 CPI consumer price report is due out Tuesday at 8:30 a.m. ET.

Republican activists seek drivers’ attention as they work to register voters to their party at a gas station in Garden Grove, California, U.S., March 29, 2022. 
Mike Blake | Reuters

Matthew Rice doesn’t have to look hard for signs of inflation in Savannah, Georgia.
A gallon of gas cost $2.79 a few months ago, he said. Now it runs him more than $4.

“And, of course, when the price of gas goes up, the price of products goes up,” the 45-year-old added. “So yeah. It’s played a role in our household.”
Rice, a longtime fan of MLB’s Atlanta Braves and a graduate of Armstrong State University, now known as Georgia Southern University, is one of the tens of thousands of Americans who say rising prices are straining their household budgets and shaping how they think about this year’s elections.
Gradual but steady jumps in the costs of groceries, housing and gas have forced consumers like Rice, who manages reservations for an RV park on nearby Tybee Island, to change how they spend money.
While his work has been busy as more Americans take long-delayed vacations following Covid pandemic-era shutdowns, Rice said inflation has made him choosier when he, his mother and 10-year-old daughter shop for groceries every other Friday.

People shop in a store in Brooklyn on March 10, 2022 in New York City. The price of gas, food, cars and other items has hit a 40 year high as inflation continues to rise in America.
Spencer Platt | Getty Images

“We have, at times, made substitutions based off what’s available because of the supply chain,” he said. “And at times, due to the price, we maybe try other brands of products that we normally would not have tried before.”

Few areas of the country have seen inflation as bad as in the South, where prices have risen across the 16-state region by an average of 8.4% from a year ago. That compares with year-over-year inflation of 8% in the Midwest, 8.1% in the West and 6.6% in the Northeast, according to the Bureau of Labor Statistics.
Inflation is particularly bad in Tampa, Florida, Miami and Atlanta where consumer prices have jumped by an average of 9.6%, 9.8% and a whopping 10.6%, respectively, over the last year.
But prices aren’t the only thing heating up in the South and West, as Georgia again finds itself in the middle of a fierce election cycle. Inflation has vaulted to the top of the minds of both voters and candidates across the state.
At the federal level, several Republicans hope to unseat Democratic Sen. Raphael Warnock, who defeated Republican Kelly Loeffler in a special election in 2020. Loeffler was appointed in 2019 by Republican Gov. Brian Kemp to finish the term of former GOP Sen. Johnny Isakson, who resigned for health reasons.
Warnock is Georgia’s first Black senator, and his win gave Democrats a razor-thin majority in the Senate.

Republican Senators David Perdue and Kelly Loeffler look on ahead of U.S. President Donald Trump hosting a campaign event with Perdue and Loeffler at Valdosta Regional Airport in Valdosta, Georgia, U.S., December 5, 2020.
Dustin Chambers | Reuters

Meanwhile, the state’s gubernatorial race pits Kemp against fellow Republican and former Sen. David Perdue, who’s been endorsed by former President Donald Trump.
In an already bitter primary competition, Perdue hopes to tap into Georgia Republicans’ frustrations with Kemp after the governor refused to overturn the 2020 election results that favored then-candidate Joe Biden. Trump falsely claimed widespread fraud led to Biden’s win, and asked the state’s top elections official to “find” enough votes for him to reverse his loss.
The GOP winner is all but certain to face another tough challenger in the November general election from Democratic candidate Stacey Abrams, who narrowly lost the 2018 governor’s race to Kemp.
But as different as Georgia’s candidates and elections are, voters are unified by their shared fatigue over rising sticker prices for gasoline, groceries and housing.
For the past several months, Labor Department data has shown that year-over-year price jumps have been hitting levels not seen since the Ronald Reagan administration. In its most recent update last month, the department said its benchmark consumer inflation index rose 7.9% over the last 12 months, the hottest reading since January 1982.
The Labor Department’s March 2022 consumer price report is due out on Tuesday at 8:30 a.m. ET.
Those familiar with the White House’s thinking say the administration expects to see a hot headline March CPI figure given that the prior print failed to fully capture a dramatic uptick in petroleum prices caused by Russia’s invasion of Ukraine that began in late February.
The CPI, or consumer price index, is the department’s tool for measuring the price changes of a basket of goods and services that everyday Americans buy each month.
Core inflation, which excludes volatile energy prices, could be more modest by comparison in the March report.

The Federal Reserve, the U.S. central bank tasked with keeping prices stable, considers inflation around 2% a healthy byproduct of economic growth. But too much can signal overheating and a disconnect between the economy’s broadest forces of supply and demand.
For consumers, unruly inflation can erode what economists call purchasing power, or the total quantity of goods and services they can buy at their current income.
But as fast as prices rise in Savannah, Rice said some grocery purchases aren’t up for debate.
“We try not to make too many adjustments because my daughter — she likes certain brands,” he laughed, saying they can’t substitute cheaper brands for Kraft Macaroni & Cheese or Quaker Oats’ Peaches & Cream flavored instant oatmeal among his daughter’s favorites. “Kids usually have a certain taste.”

Inflation nation

Economists say the country’s inflation woes began in the spring of 2021 as Covid vaccines arrived and then was exacerbated by a variety of seemingly unrelated factors.
The inoculations stoked demand for all the things consumers gave up to stay safe during the worst of the pandemic — travel and dining out. Demand also surged for new cars, paid for in part with all the money saved by staying in for months.
Factory shutdowns during the pandemic left automakers like Ford and General Motors behind on production. The surge in demand, combined with a shortage of computer chips, further reduced vehicle inventory and sent prices soaring on cars and electronics.

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Labor shortages — due in part to people calling out sick with Covid or quarantining because of an exposure — led to freight backlogs at the ports of Los Angeles and Long Beach, California, and higher shipping costs that were passed on to consumers.
Russia’s invasion of Ukraine has sent oil prices spiking, and soaring real estate values have driven up the cost of housing.
Caroline Fohlin, an economics professor at Emory University in Atlanta, said Arizona and Georgia are both seeing steep home price jumps as people leave the country’s largest cities for cheaper locales. The pandemic opened up the prospects of working from home — from anywhere — for city dwellers who could buy expansive homes with yards for the cost of a one-bedroom apartment in New York or San Francisco.
Online listing website Apartment List shows that Atlanta rents climbed by about 18% over 2021, with the average per-month cost for a one-bedroom apartment at $1,831.
“They’re moving in droves to places like Savannah, Charleston – you know, the coastal South,” Fohlin said. “Take a look at the real estate market in, say, Sullivan’s Island, South Carolina” where “shacks” are selling for millions.
“That’s great news for the old-timers who are able to sell their previously $50,000 shacks for $3 million,” she said.

A “for sale” sign in front of a home that Zillow shows has a pending sale of 750,000 dollars on February 18, 2022 in Miami, Florida.
Joe Raedle | Getty Images

Roger Ferguson, former vice chair of the Federal Reserve, attributed most of the rise in consumer prices in Georgia and Arizona to the increase in housing costs.
“There might be some differences in terms of your labor force, compensation composition,” Ferguson, a CNBC contributor, said last month. “But my hypothesis is that it’s primarily around housing.”
In New York City, where renters comprise about 67% of all households, the average rent for a one-bedroom apartment fell from about $1,920 per month in February 2020 to $1,510 by January 2021 as residents fled congested cities, according to Apartment List.
Rents have more than rebounded since then as bosses increasingly insist on workers returning to their offices. The monthly cost of a one-bedroom apartment in New York City is now around $2,068.

Politics of prices

The mismatch between supply and demand, and the resulting inflation, has blossomed into a critical issue for Biden and Democrats hoping to retain control of Congress this year.
Nearly 1 in 5 Americans, 17%, said in March that inflation is the most important problem facing the U.S., according to polling site Gallup. That figure represents a 7 percentage point climb from the 10% of Americans who in February said inflation was the country’s chief headache.

Gasoline fuel prices above five dollars a gallon are displayed at a Shell gas station in the Chinatown neighborhood of Los Angeles, California, on February 17, 2022.
Patrick T. Fallon | AFP | Getty Images

As inflation has climbed, Biden’s polling has fallen: Just 36% of those surveyed by Gallup in a recent poll say they approve of his handling of the economy, down from 54% in February 2021.
Republicans hoping to win back control of Congress have seized on rising prices as evidence of economic mismanagement and frivolous spending by Democrats, who control the White House and both chambers of Congress. They have focused on the $1.9 trillion American Rescue Plan, the Democratic coronavirus relief law passed in March 2021, as vaccines were starting to boost demand in the U.S.
One such Republican is former pro football player Herschel Walker, who’s running against Warnock in Georgia’s Senate race.

Former college football star and current senatorial candidate Herschel Walker speaks at a rally, as former U.S. President Donald Trump applauds, in Perry, Georgia, U.S. September 25, 2021.
Dustin Chambers | Reuters

Walker, a longtime Trump ally, echoed the frustrations of many Georgia Republicans earlier this year when he shared on Twitter an image of a near-barren grocery store shelf and blamed Democrats’ economic agenda for the frothy inflation.
“Our shelves are empty, the supply chain is a mess, and inflation is at the HIGHEST in 40 years,” Walker wrote in a Jan. 19 Twitter post. “President Biden’s approval ratings continue to drop. Why is he focused on social spending? People just want affordable gas and groceries on the shelves!”
Democrats attribute the price spikes to a combination of overwhelmed supply chains, the war in Ukraine, labor shortages and unprecedented demand. Warnock specifically has met opponents’ inflation barbs by blaming corporate profiteering.
“While corporations are seeing record profits, Georgia consumers are seeing record prices,” Warnock said in a Twitter post from February. “Whether it’s working to ease supply chain issues, or capping out-of-pocket costs for prescription drugs, I’m fighting for hardworking Georgians every day.”

Heating up in Arizona

Across the country in Arizona, prices have also affected consumer spending — and the political landscape.
Aaron Spector, a 28-year-old Tempe resident, said his landlord’s move to hike rent by nearly 20% led him to make some changes — he bought his own home.
“Honestly, it just didn’t make sense to rent anymore with the increase that I was seeing,” Spector, who works in sales for a logistics firm, told CNBC. “I did want to buy a house – it was on the timeline. But it was definitely expedited – almost necessary – when I saw what the rent was increasing to.”
In nearby Phoenix, Kevin McElwain said signs of housing cost hikes are everywhere.
McElwain, who works sourcing labor and materials for homebuilders, said more expensive raw materials are fueling prices for new homes.
“Anything from framing, concrete, electrical – you name it. Prices have risen probably by at least 50%,” he said. A lot of the problem, he explained, comes from shortages of supply for workers and raw commodities.
“You have people that will turn down bids for new projects because either they don’t have the necessary parts and materials, or they don’t have the crews,” McElwain, 29, said.

Stacks of lumber are offered for sale at a home center on April 05, 2021 in Chicago, Illinois.
Scott Olson | Getty Images

Those shortages are likely a main culprit in Phoenix’s high prices, which have risen 10.9% over the last 12 months. Over the last year in the city, meat prices have jumped 16.2%, clothing costs have climbed 15.5% and restaurant bills are up 5.9%.
Spector said that inflation, and the state of the economy more broadly, will influence him at the ballot box come Election Day.
“It will definitely impact how I vote,” the graduate of the State University of New York at Geneseo said. “It will obviously have an impact. When people’s bank accounts are affected like this, it changes people’s minds.”
Phoenix resident McElwain, who said he’s not registered to vote with either party, said inflation is on his mind this election year.
“I’d like to see it be addressed by the candidates that are running,” he continued. “But I’m still going to take everything that they have to say with a grain of salt one way or the other.”

Sen. Mark Kelly, D-Ariz., conducts a news conference outside the Capitol to discuss the Military Justice Improvement and Increasing Prevention Act, which would remove serious crime prosecution out of the chain of command, on Thursday, April 29, 2021.
Tom Williams | CQ-Roll Call, Inc. | Getty Images

Votes from McElwain and Spector this fall will help determine whether Democratic Sen. Mark Kelly will hold on to the seat he won in Arizona’s 2020 special election against then-GOP incumbent Martha McSally to finish out the remainder of former Sen. John McCain’s term.
Like Warnock, Kelly has tried to convince voters that he and his fellow Democrats are working to check unruly prices.
The retired astronaut in March detailed “6 Things” he is doing to try to cool inflation in Arizona. Those efforts include a bill to suspend the federal gas tax for the rest of 2022, his contributions to the CHIPS semiconductor bill and a deal to cap out-of-pocket prescription costs for seniors.
“We’re in the middle of a global microchip shortage that’s driving up prices on everything from cars to appliances,” Kelly said in a Twitter post April 2. “Our bill to boost U.S. microchip manufacturing will help end that shortage, create thousands of high-paying jobs for Arizonans, and grow our state’s economy.”
The strain soaring inflation has put on Americans — and the anxiety it has caused incumbents running this fall — has shown up repeatedly in the policy choices made by swing-state lawmakers this year. On Thursday, Senate Majority Leader Chuck Schumer, D-N.Y., named both Kelly and Warnock to a conference committee that will hash out a final microchip bill with House members.
Both senators have also tried to show voters they can address an issue that has vexed Rice in Georgia and people across the U.S.: high gas prices. Kelly and Warnock co-sponsored legislation that would suspend the U.S. gas tax for the rest of the year. The bill has not moved forward since senators unveiled it in February.
“This bill will lower gas prices by suspending the federal gas tax through the end of the year to help Arizona families struggling with high costs for everything from gas to groceries,” Kelly said in a statement at the time.
Warnock added in his own statement: “Hardworking Georgians being squeezed at the pump understand that every penny counts.”
Correction: Quaker Oats has a Peaches & Cream flavored instant oatmeal. An earlier version misstated the name of the product.

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