Decoding the Price Signals
Bloomberg Businessweek|May 17, 2021
What’s real, what’s transitory, what’s base-effect distortion? Let’s cut through the noise
By Peter Coy, with Michelle Jamrisko and Vivien Lou Chen

We’ve been told for years that inflation has been too low. Now that it’s finally reached and surpassed the Federal Reserve’s 2% target, it looks as scary as the fast-growing carnivorous plant in Little Shop of Horrors.

Iron, copper, lumber, cotton, computer chips, and gasoline are jumping in price. The dollar has weakened, making imports more costly. Employers are having to raise wages to fill record openings; the federal government is spending heavily; and consumers emerging from the pandemic are in the mood to light some money on fire. On May 12 the U.S. Bureau of Labor Statistics reported that consumer prices rose 0.8% in April from March, four times the median expectation and the most since 2009. Excluding food and energy the increase was 0.9%, the most since 1982.

Stock indexes have retreated since May 7, when the S&P 500 hit a record. But jitters about the economic equivalent of an out-of-control, man-eating houseplant are more clearly evident in the bond market. Investor bets on the average inflation rate over the next 10 years have shot up from their Covid-19 low of less than 1% in 2020 to more than 2.5%, the highest since 2013.

The nervousness may get worse. “One always has to be careful not to overplay a few anecdotes and project that onto the broader economy,” Douglas Porter, chief economist at BMO Capital Markets, wrote in an April 30 report. “But as the anecdotes accumulate, they eventually become data.”

So how worried should we be? This package of stories tries to answer that question. It focuses mostly on the U.S. but also takes a look at China, where manufacturers are beginning to pass along their higher costs to customers around the world.

Continue reading your story on the app

Continue reading your story in the magazine

MORE STORIES FROM BLOOMBERG BUSINESSWEEKView All

Young U.S. Jews Shift on Israel

Millennial and Gen Z progressives question American support of Israeli policies, a point of tension for the Democratic Party

4 mins read
Bloomberg Businessweek
June 14, 2021

Fever Pitch

A British tonic maker aims to conquer the U.S. with its premium mixers

4 mins read
Bloomberg Businessweek
June 14, 2021

Welcome to the Trump Coast

The former president’s strategic retreat to Mar-a-Lago has helped turn Florida into a new home base for Republicans

10+ mins read
Bloomberg Businessweek
June 14, 2021

THE SEDITION HUNTERS

Amateur sleuths pore over photos and videos online to ID Capitol rioters

6 mins read
Bloomberg Businessweek
June 14, 2021

The FOMO Economy

From AMC to Dogecoin to houses, buying seems driven as much by anxiety as by hope

7 mins read
Bloomberg Businessweek
June 14, 2021

KING OF CARDS

Sports trading cards are having a moment. And no one promotes the industry like Ken Goldin

10+ mins read
Bloomberg Businessweek
June 14, 2021

Pay Attention to the Man Behind the Curtain

Vladimir Putin’s tolerance for criminal hackers will be on the agenda when he meets with President Biden on June 16

4 mins read
Bloomberg Businessweek
June 14, 2021

It's TEQUILA O'CLOCK In NYC

Jimmy Buffett’s Margaritaville is a hit song, a chill state of mind, a billion-dollar marketing empire, and the new best worst attraction in Times Square

10+ mins read
Bloomberg Businessweek
June 14, 2021

Is Streaming the Limit for Sky?

As its content providers start online services, the broadcaster pivots to create its own shows

5 mins read
Bloomberg Businessweek
June 14, 2021

China's Dangerous Diplomacy

Why the Wolf Warriors won’t change course

6 mins read
Bloomberg Businessweek
June 14, 2021