Commenting on the latest CPI data, Philadelphia Fed President Patrick Harker said Thursday morning that he expected the “eye-popping” inflation readings of 2022 were behind us and that it made sense to slow down the pace of rate hikes.
Harker’s comment is somewhat misleading and out-of-sync with the pain of inflation felt by average Americans. Keep in mind that when Harker makes the statement, he focuses on only the past 12 months and thereby ignores that the prices sharply climbed during the 12 months of 2021.
The Consumer Price Index (CPI) released by the government last week showed a 6.5% year-over-year increase in prices from December 2021 to December 2022, edging down from a rate of 7.1% in November. The CPI has declined steadily from a 40-year high of 9.1% in June to 6.5% in December.
Prices have increased by 12.8% under President Biden’s watch between February 2021 and December 2022. We developed the TIPP CPI, a metric that uses February 2021, the month after President Biden’s inauguration, as its base and measures the rate of change.
While we recognize that CPIs are index numbers, for common understanding, when we refer to TIPP CPI and BLS CPI, we mean percent change.
Bidenflation, measured by the TIPP CPI using the same underlying data, stood at 12.8% in December. It was 13.2 in November, 13.3% in October, 12.8% in September, and 12.6% in August.
All TIPP CPI measures are anchored to the base month of February 2021, making it exclusive to the economy under President Biden’s watch. Please note that we use the relevant Bureau of Labor Statistics (BLS)underlying data but recalibrate it to arrive at the TIPP CPI.
Significant inflation had already set in by the middle of 2021. In November 2021, CPI inflation was 6.8 percent. The official CPI year-over-year increases will compare prices to already inflated bases in the coming months. The year-over-year calculation may moderate the statistics, but you will still feel the pinch of inflation.
TIPP CPI vs. BLS CPI
The following four charts present details about the new metric.
The official year-over-year CPI increase reported by BLS is 6.5% for December 2022. Compare this to the TIPP CPI of 12.8%, a 6.4-point difference. Prices have increased by 12.8% since President Biden took office.
Food prices increased by 16.8% under President Biden’s watch compared to only 10.4% as per BLS CPI, a difference of 6.3 points.
Energy prices increased 28.9% per TIPP CPI compared to 7.3% according to BLS CPI, a difference of 21.6 points.
The Core CPI is the price increase for all items, excluding food and energy. The Core TIPP CPI was 10.9% compared to 5.7% BLS CPI in the year-over-year measure, a 5.2-point difference.
Further, gasoline prices have increased by 28.9% since President Biden took office. However, the BLS CPI shows that gasoline price has slipped 1.51%, a difference of 30.4 points.
Used car prices have risen by 25.7% during President Biden’s term. The BLS CPI shows that the prices have dropped by 8.8%, a difference of 34.6 points.
Inflation for air tickets under President Biden is 36.2% compared to the BLS CPI finding of 28.5%.
Americans’ Concerns
The latest Investor’s Business Daily/TIPP Poll, completed earlier this month, shows that nine in ten (89%) of survey respondents are concerned about inflation. Throughout the past year, inflation concerns have stayed above 80%. The share of “very concerned” has been over 50% for eleven consecutive months.
Most respondents (52%) say their wages have not kept pace with inflation. Only one in five (21%) say that it has. The share, who said wages had kept pace, has hovered in the 17% to 22% range since January 2022.
As a result of inflation, Americans are cutting back on household spending.
Most Americans are spending less on eating out (76%), entertainment (75%), purchases of big-ticket items (74%), holiday/vacation travel (72%), and memberships/subscriptions (64%).
Many (60%) are cutting back on even good causes such as charity giving. The high gasoline prices forced 58% to cut back on local driving. Nearly three out of every five (57%) households spend less on groceries.
Inflation Direction
The chart below compares the 12-month average of monthly changes against the 6-month and the 3-month averages. We also show the reading for December 2022.
The 12-month average considers 12 data points and presents a long-term reference, while the six-month and three-month averages consider recent data points.
To better understand, compare the three-month average to December 2022 data. For “all items,” the three-month average was 0.13 vs. -0.1 in December 2022. It is decreasing, and hence it is good.
Similarly, for “Energy,” the rate is decreasing. The decrease in December 2022 (-4.50) exceeded the three-moving average of -1.43, indicating deceleration.
For “All items less food and energy,” though the trend is down generally, the December reading of 0.30 was higher than the three-month average of 0.27, a cause for some concern.
The U.S. economy is in stagnation – high inflation combined with an economic slowdown.
To access the TIPP CPI readings each month, you can visit tippinsights.com. We’ll publish the TIPP CPI and our analysis in the days following the Bureau of Labor Statistics (BLS) report. The upcoming release of TIPP CPI is February 16, 2023. We’ll also post a spreadsheet in our store for free download.
Hey, want to dig deeper? Download data from our store for free!
Want to understand better? We recently wrote an explainer that sixth graders can understand. Everyone can benefit from it.
Milton Friedman’s Priceless Lessons On Inflation
TIPP Takes
Geopolitics And Geoeconomics
#1. Britain Announces It Will Send Tanks To Ukraine – RFE/RL
British Prime Minister Rishi Sunak has informed Kyiv that Britain intends to send main battle tanks and artillery support to aid Ukraine’s war effort against invading Russian forces.
Sunak discussed Britain’s plans during a phone call with Ukrainian President Volodymyr Zelensky, according to a spokesperson for the prime minister’s office.
“The prime minister outlined the U.K.’s ambition to intensify our support to Ukraine, including through the provision of Challenger 2 tanks and additional artillery systems,” the spokesperson said.
It would mark the first time Britain has supplied heavy armor to Kyiv following Russia’s all-out invasion in February.
The Russian Embassy in London condemned the government’s decision, saying that sending British tanks to Ukraine would only “intensify combat operations” and that “one really cannot put out a fire with petrol.”
#2. Ukraine Official Says Zelenskyy Hopes To Visit U.N. Next Month – A.P.
President Zelenskyy wants to visit the U.N. to address a meeting of the General Assembly on the eve of the first anniversary of Russia’s February 24 invasion of his country if the security situation permits.
First Deputy Foreign Minister Emine Dzhaparova cautioned in an interview that many factors need to be in place for him to come. First and foremost, the military situation on the ground will dictate.
“Our president would want to come. He has a will or intention to come,” she said, “but it’s still a question if there will be a security situation that will allow him to come.”
#3. Russia May Change Age Range Of Conscription, Putin ‘Supports’ Idea – WION
A Russian lawmaker has hinted that Russia may raise the citizens’ age range for compulsory military service. The change may take place as early as this spring.
In an interview with Russia’s official parliamentary newspaper, the chairman of the Russian parliament’s defense committee, Andrei Kartapolov, said that the age range may be changed from 18-27 years to 21-30 years. He said the change might be brought into force this spring but only after a one-to-three-year “transition period.”
Critics said the idea of a transition period was a transparent attempt by Russian authorities to increase the number of Russians eligible to be called up for military service to plug massive manpower shortages resulting from heavy losses in Ukraine.
#4. Russia-Ukraine War: Turkey Denies Supplying Kyiv With Cluster Munitions – Middle East Eye
A senior Turkish official has strongly denied reports alleging that Ankara delivered cluster bombs to Ukraine last year.
“We don’t have cluster munitions, and we haven’t provided them to Ukraine,” Ibrahim Kalin, the Turkish president’s spokesperson, said in a briefing with reporters.
“Ukrainians themselves denied it.”
U.S. magazine Foreign Policy reported on Tuesday that Turkey began sending Ukraine a form of US-designed cluster bomb in late 2022, citing former U.S. and European officials familiar with the decision. It said Kyiv had been pleading with the Biden administration for the munitions for months.
“The NATO ally began sending the first batches of so-called dual-purpose improved conventional munitions (DPICMs) in November 2022, which were made during the Cold War era under a co-production agreement with the United States,” the report added.
The production and use of cluster munitions are prohibited under international law.
#5. China’s 2022 Growth Seen As Its Lowest In 40 Years – AFP
China’s economic growth for 2022 is expected to have been among its weakest in four decades after the twin crises of the pandemic and property woes, analysts said ahead of Tuesday’s GDP announcement.
Ten experts interviewed by AFP forecast an average 2.7 percent year-on-year rise in the gross domestic product (GDP) for the world’s second-largest economy, a sharp plunge from China’s 2021 growth of more than 8 percent.
It could also be China’s slowest pace since a 1.6 contraction in 1976 — the year Mao Zedong died — and excluding 2020 after the Covid-19 virus emerged in Wuhan in late 2019.
Beijing had set itself a growth target of around 5.5 percent for 2022, but this was undermined by the government’s “zero-Covid” policy, which put the brakes on manufacturing activity and consumption.
#6. China Calls For More African Representation In International Bodies – RFI
Chinese Foreign Minister Qin Gang said Africa should have a greater voice in the U.N. Security Council and other international bodies, something the continent’s leaders have long called for.
The diplomat is on a week-long tour of five African countries to oversee numerous infrastructure projects.
“We should boost the representation and voice of developing countries, especially those of African countries, in the U.N. Security Council and other international organizations,” Qin said. He spoke at the inauguration of the Chinese-funded headquarters for the African Centre for Disease Control and Prevention in Ethiopia’s capital Addis Ababa.
The U.N. Security Council comprises 15 members, five of whom are permanent and have veto-wielding power: the United States, Russia, China, France, and Britain. The other ten positions are filled by other countries for two-year stints, five of which are announced each year.
#7. WHO Appeals To China To Release More COVID-19 Information – A.P.
The World Health Organization appealed to China to keep releasing information about its wave of COVID-19 infections after the government announced nearly 60,000 deaths since early December.
The announcement Saturday was the first official death toll since the ruling Communist Party abruptly dropped anti-virus restrictions in December despite a surge in infections that flooded hospitals. That left the WHO and other governments appealing for information, while the United States, South Korea, and others imposed controls on visitors from China.
The government said 5,503 people died of respiratory failure caused by COVID-19, and there were 54,435 fatalities from cancer, heart disease, and other ailments combined with COVID-19 between December 8 and January 12.
#8. U.K. Sanctions Iran’s Prosecutor General, Recalls Ambassador Over Akbari’s Execution – Al Arabiya
Britain has imposed sanctions on Iran’s Prosecutor General and temporarily recalled its ambassador from Tehran in response to Iran’s execution of Iranian-British dual national Alireza Akbari.
Sanctioning the Prosecutor General of Iran, Mohammad-Jafar Montazeri, “underlines our disgust at Alireza Akbari’s execution,” Cleverly wrote on Twitter.
“The Prosecutor General is at the heart of Iran’s use of the death penalty. We’re holding the regime to account for its appalling human rights violations,” he added.
In a tweet later the same day, Cleverly said London had temporarily recalled its ambassador from Tehran for consultation.
Iran said on Saturday it had executed Akbari for allegedly spying for Britain.
#9. Ankara Says Time Running Out To Ratify Sweden, Finland NATO Bids – Al Jazeera
Turkish presidential spokesman says that Ankara is running out of time to ratify NATO membership bids by Sweden and Finland before the general elections expected in May.
President Recep Tayyip Erdogan’s spokesman, Ibrahim Kalin, said that Turkish ratification of the countries’ bids depended on how quickly Stockholm fulfills “counterterrorism” promises made as part of a deal with Ankara, warning that could take months.
“Stockholm is fully committed to implementing the agreement signed last year in Madrid, but the country needs six more months to write new laws that would allow the judicial system to implement the new definitions of terrorism,” Kalin told a news conference in Istanbul.
Along with Finland, Sweden signed an agreement with Turkey last year to overcome Ankara’s objections to their NATO bids, which were made in May last year and required the approval of all 30 NATO member states. Both countries applied to join NATO after Russia invaded Ukraine in February.
#10. ‘A Plan To Change Israel’s DNA’: 80,000 Rally In Tel Aviv Against Judicial Overhaul – The Times Of Israel
Demonstrators braved pouring rain to gather at Tel Aviv’s Habima Square to protest against PM Benjamin Netanyahu’s new government and its plans for sweeping changes to Israel’s justice system.
Police estimated some 80,000 people rallied in the square and surrounding streets, with many traveling to Tel Aviv from around the country on hired buses. Demonstrations were also held in Jerusalem and Haifa.
Many in the crowd carried Israeli flags and placards denouncing the coalition’s plans to shackle the judicial system. A few carried Palestinian flags. “Fighting for democracy,” declared a large banner at the rear of the elevated stage.
The demonstration marked the second week that opponents of Netanyahu’s government took to the streets, protesting Justice Minister Yariv Levin’s proposals. The proposals included curbing Israel’s independent judiciary by severely restricting the High Court of Justice’s judicial review powers and cementing political control over the appointment of judges.
#11. North Korean Nuclear Test Inevitable, China Unwilling And Unable To Help: Victor Cha – Yonhap
A North Korean nuclear test might be inevitable. Despite its perceived influence in Pyongyang, China may be unwilling to help prevent such a test, former U.S. nuclear negotiator Victor Cha said.
Cha also insisted that Beijing may not have the means to prevent North Korea from conducting a nuclear test even if it wanted to in a recent interview with Yonhap News Agency.
“I think it’s inevitable. I think its seventh nuclear test is inevitable, and I think another Hwasong-17 (intercontinental ballistic missile) test using a solid fuel propeller, I think that’s inevitable because, in the New Year speech, they said that,” said Cha, currently a senior vice president at a Washington-based think tank.
#12. Japan PM Vows To Pitch Vision Of World Without Nuclear Weapons At G-7 – Kyodo News
Japanese PM Fumio Kishida pledged to pitch a world without nuclear weapons at the Group of Seven summit in Hiroshima in May amid fears that Russia might use an atomic device in the ongoing war.
Kishida’s remarks came after he held talks with his French, Italian, British, Canadian, and U.S. counterparts earlier this week during a weeklong trip to five of the G-7 countries in Europe and North America in the run-up to the gathering in the western Japan city.
The world should “not make light of the history” in which no nuclear weapons have been used over the past 77 years, said Kishida, elected from a Hiroshima constituency, in comments at a press conference in Washington.
#13. Tunisia: Opposition Rallies Mark 12th Protest Anniversary – D.W.
Thousands of Tunisians who oppose sitting President Kais Saied took to the capital’s central streets to mark the 12th anniversary of the country’s uprising that launched the Arab Spring revolutions.
Saturday’s protests were mainly organized by the country’s biggest opposition movement, the National Salvation Front (FSN). The group’s main component is the Islamist Ennahda party, which is Saied’s nemesis.
In July 2021, President Kais Saied suspended the constitution and parliament, casting aside the Islamist Ennahda party and paving the way for a new constitution that expanded the president’s powers at the expense of parliament.
Protests against the autocratic regime of former President Zine el-Abidine Ben Ali were crowned on January 14, 2011, by his ouster, as he fled the country on the same day and ushered in a new era.
The protests sparked a wave of similar movements in the Arab World. But for years, Tunisia seemed to be the only country that enjoyed a democratic system since the Arab Spring.
#14. Pakistan’s Economy Grinding To A Halt As Dollars Dry Up – AFP
Thousands of containers with essential food items, raw materials, and medical equipment have been held up at Pakistan’s Karachi port as the country grapples with a desperate foreign exchange crisis.
A shortage of crucial dollars has left banks refusing to issue new letters of credit for importers, hitting an economy already squeezed by soaring inflation and lackluster growth.
State bank forex reserves this week dwindled to less than $6 billion — the lowest in nearly nine years — with obligations of more than $8 billion due in the first quarter alone. According to analysts, the reserves are enough to pay for around a month of imports.
Pakistan’s economy has crumbled alongside a simmering political crisis, with the rupee plummeting and inflation at decades-high levels. Devastating floods and a major shortage of energy have piled on further pressure.
The South Asian nation’s enormous national debt –- currently $274 billion, or nearly 90 percent of gross domestic product — and the endless effort to service it makes Pakistan particularly vulnerable to economic shocks.
#15. Greta Thunberg Joins Anti-Coal Activists To Save German Village – Al Jazeera
Climate activist Greta Thunberg and thousands of demonstrators marched in Germany against demolishing a village to make way for a coal mine described as “one of the biggest carbon bombs in Europe.”
Crowds of activists demonstrated on Saturday in the western hamlet of Luetzerath, waving banners and chanting as a bass band accompanied them.
Luetzerath, deserted for some time by its original inhabitants, is set to disappear to make way for an extension of the adjacent open-cast coal mine, one of the largest in Europe. It is operated by the energy firm RWE.
Environmentalists say bulldozing the village to expand the Garzweiler mine would result in huge amounts of greenhouse gas emissions. The government and RWE argue that coal is needed to ensure Germany’s energy security.
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Republished with permission from TIPP Insights
