US disinflation and the COVID-19 supply shock
US disinflation and the COVID-19 supply shock
Supply chain disruptions from the COVID-19 pandemic are still being felt today, Robin Brooks, Peter R. Orszag, and William E. Murdock III explain.
Bare shelves during the COVID-19 pandemic may have made inventory managers more conservative. That more conservative approach to inventories, in turn, could have generated a wider gap between output prices (where higher prices diminish end demand and therefore boost inventories) and input prices...Output prices rose significantly more than input prices, i.e., firms hiked margins, potentially as a mechanism to better conserve inventory...(Note that this potential driver of COVID-era margin expansion is distinct from and potentially more plausible than “greedflation.”)
Maybe it started out as inventory managers trying to conserve inventory due to uncertainty, but if you look at the charts, output prices spiked even after input prices had come down significantly, and after supply chains had normalized considerably. I think once the businesses saw that people were still buying at the higher prices, and the record profits they were making, they couldn't turn down the opportunity. It was probably a combination of inventory management and greedflation. There's no reason why it has to be only one or the other.
It was probably a combination of inventory management and greedflation. There's no reason why it has to be only one or the other.
Corporate price gouging has not been a primary driver of U.S. inflation, according to research published on Monday by economists at the Federal Reserve Bank of San Francisco.
While markups for motor vehicles and petroleum products did rise sharply during the 2021-2022 inflation surge, markups across the entire spectrum of U.S. goods and services have been relatively flat during the post-pandemic recovery, the bank's latest Economic Letter showed.
"As such, rising markups have not been a main driver of the recent surge and subsequent decline in inflation during the current recovery," wrote the bank's research chief Sylvain Leduc and colleagues Huiyu Li and Zheng Liu.
Holy shit, actual analysis from a thinktank! And here I was so used to thinly veiled lobbying, propaganda pieces, and bribery that I had begun to think the American research institute was dead.
On the actual substance: if this is true, it should be good politically, but I suspect that recovery from the lingering economic trauma arising from inflation (real or imagined) will lag even further. People feel like prices are still rising too fast, whether they actually are or not, and the aforementioned propaganda engine doesn't help.
Usually what happens is that a Democrat works their ass off fixing the economy, the felt effects lag, and a Republican gets to grunt about how great "their economy" is.
Straight from the regime propaganda original source folks!!!
Hilarious :)
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