Fast inflation began to kick in early last year, and economists initially predicted that it would fade by the end of 2021 as the economy reopened from the pandemic and conditions returned to normal.
Instead, turmoil in supply chains collided with strong consumer demand for goods, and price gains accelerated. Now, how quickly and how much prices will moderate in 2022 are increasingly uncertain as conflict abroad threatens to keep shipping routes tangled and key parts scarce. Ukraine is an important producer of neon, which could keep computer chips in short supply, perpetuating the shortages that have plagued automakers. Higher energy costs could ricochet through other industries.
There are still reasons to think price gains will slow somewhat. Starting in the March data, they will be lapping high readings from last year, which should mechanically bring down the year-over-year measure. But it is unclear when they will recede to the Fed’s 2 percent inflation goal. The central bank defines that target using a separate inflation index, but one that is also elevated.
For people like Timothy Gutbrod, 61 and from Albany, the rapid inflation has caused lifestyle changes. Mr. Gutbrod, who formerly worked as a stage actor, has been a driving instructor since March 2020, and the job pays him a little more than $30,000 per year. As higher gas prices have made his commute and everyday purchases more expensive, he has been eating out less.
For someone who was a longtime Manhattanite, that’s a real loss, Mr. Gutbrod said. He used to enjoy three restaurant brunches or dinners each week. Now it’s more like one every two weeks.
“I used to go on relaxing drives,” he said, but now joy rides are unaffordable. “I’m on a shoestring budget, and I work pretty hard. For anyone who doesn’t make a lot of money, you have to be intelligent and start cutting corners.”
As it disturbs everyday lives, inflation is likely to dog Democrats and the administration as they fight to retain control of Congress in November. Despite plentiful jobs and quickly rising wages, consumer confidence has fallen to its lowest level since the summer of 2011, when the economy was clambering back from the global financial crisis and Congress was bickering over lifting the nation’s debt ceiling.