Anyone looking for good economic news will be disappointed by the latest inflation report, which showed the consumer price index (CPI) advancing by 0.5 percent in January. By itself, this isn’t especially alarming — prices jump around month to month — but it has troubling implications for the future. To some economists, it suggests the possibility of another financial crisis on the order of the 2008-2009 crash.
Until recently, inflation seemed to be dead or, at least, in a prolonged state of remission. It was beaten down by cost-saving technologies and a caution against raising wages and prices instilled by the Great Recession. From 2010 to 2015, annual inflation as measured by the CPI averaged about 1.5 percent, often too small to be noticed. In 2016 and 2017, the annual rates inched up to 2.1 percent. On an annualized basis, January’s 0.5 percent would be 6 percent.
It’s doubtful that many economists believe that inflation is now so high. Remember those erratic month-to-month swings. But the pervasive nature of the inflation suggests that supply is shrinking compared with demand. This enables businesses to raise prices. The January gains, wrote Ken Matheny of Macroeconomic Advisers, were “broad-based, with increases in . . . apparel, used cars and trucks, shelter, medical care services and transportation services.”
