Inflation terrorism is the latest attack on the Trump administration. The Iran conflict has boosted oil prices, which can affect the price of many other items. There is an inflation bump, how long it will last is unclear. The report this week on price increases for May indicated that on a month-over-month basis the rise was .5% and on a year-over-year one, 4.2%. The supposed “core” number was lower, as it excludes energy and other “volatile” items. Interestingly, the prices of goods declined, while those of services rose. Housing prices were up, as were hospital services and airline fares. Car insurance saw declining prices as did prescription drugs. The pace of growth in food prices was much lower.
The biggest concern I have is that income growth is falling below the pace of inflation; it is really important from a quality of life perspective for income to grow faster than inflation. I would anticipate that countries and companies will find ways to work around the Strait of Hormuz issues, which will be of long-run benefit. Trump’s control of Venezuelan oil looks like a genius move. When oil supply issues seem more stable, I would expect overall price growth will moderate. But in the meantime, we will have all inflation terrorism all the time in the mainstream media.
