The current U.S. stock market is suffering the unfamiliarity of people born in 1970 and later who have had no experience with real inflation. Both CPI and PPI show increases which reflect year-on-year the effect of growth to recovery from the pandemic lows of 2020. The comparison of month-over-month and year -over-year show the differences in how inflation can be viewed. While April 2021 PPI is being "reported" as the highest increase since 2009, April 2020 PPI, reported exactly one year ago today, was the biggest drop since 2009. For more perspective, this is what PPI looks like over the last 25 years.
Federal Reserve Chairman Powell, Fed regional Presidents, and Treasury Secretary Yellen have repeatedly, for a few months now, cautioned that there will be transitory inflation as the economy recovers towards normalcy.
Part of this transitory inflation will include increases in normally volatile commodities, such as food and gasoline and increases in commodities in substantially more demand as growth and demand increases until supply and.or production catch up.
The shortage of microchips is an example as it has caused new car and truck production to slow or halt, while the price of used vehicles goes up. The demand for lumber is another example.
Economic recovery from the pandemic recession will require significant continuing governmental fiscal spending to boost economic growth and employment by supporting families and their ability to find safe jobs at a pay level which does not keep them in poverty and allows them to afford child care, transportation, housing, food, medical care, and education expenses. It is not surprising that women have consequently suffered significant job loss. Until the long term unemployment rate goes down by millions of people, of which 24% have been unemployed for more than a year, more, the Fed will not be looking seriously at tapering.
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