The Economy under COVID-19: Notes from my New Hiding Place

Since we’re all cautiously emerging from sanctuary, the former title of my articles, written while I was housebound – Notes from the Trenches, – no longer applies. Therefore, I’ve chosen a new heading, as you will observe above. It still captures a certain wariness on my part.

The U.S. rate of general price inflation in April was +0.3% year over year. For ‘core’ alone, it was +1.4%. ‘Core’ leaves out price-volatile food and energy sub-components. The +0.3% and +1.4% percentage changes for ‘all items’ and ‘core’, though, fail to convey the swirling currents for many products that lie a little deeper in the price stream.

The following are eight grocery items within the U.S. Consumer Price Index (CPI) in April that displayed notably large year-over-year increases. There’s a strong correlation between these price climbs and what everyone has been talking about in terms of bottlenecks at meat processing plants; the stockpiling of paper products; and a big trend towards baking at home. (The latest month-to-month changes are in brackets.)

Eggs, +17.3% y/y (+15.0% m/m);
Household paper products, +6.3% y/y (+4.5% m/m);
Beef +7.5% y/y (+4.2% m/m);
Pork +6.8% y/y (+2.7% m/m);
Poultry +6.3% y/y (+4.7% m/m);
Sugar and sugar substitutes +8.2% y/y (+2.4% m/m);
White bread +6.4% y/y (+3.5% m/m);
Carbonated drinks +6.6% y/y (+3.5%);

As much as there have been some significant food price increases, they have been more than offset by outsized drops for CPI sub-components relating to energy, clothing, electronics and accommodation. The following are 12 instances of double-digit percentage-change declines, year over year. Also, appearing at the bottom, is one case of a double-digit percentage increase, for health insurance.

Gasoline (all types), -32.0% (-16.5%);
Men’s suits, sport coats, and outerwear, -13.1% (-13.7% m/m);
Women’s outerwear, -14.9% (-8.0% m/m);
Women’s dresses, -17.8% (-10.1% m/m);
Infants’ and toddlers’ apparel, -10.9% (-3.3% m/m);
Televisions, -16.2% (-0.9% m/m);
Sewing machines, fabric and supplies, -10.0% (-1.3% m/m);
Computer software and accessories, -10.6% (-3.8% m/m);
Telephone Hardware and calculators, -14.2% (-1.0% m/m);
Lodging away from home (hotels/motels), -16.0%, (-7.0% m/m);
Car & truck rental, -15.3% (-17.6% m/m);
Airline fares, -24.3% (-12.4% m/m);
Health insurance, +20.2% (+1.1% m/m).

Read the previous article here: The Economy Under COVID-19: Notes from the Trenches – May 26, 2020.

Alex Carrick is Chief Economist for ConstructConnect. He has delivered presentations throughout North America on the U.S., Canadian and world construction outlooks. Mr. Carrick has been with the company since 1985. Links to his numerous articles are featured on Twitter @ConstructConnx, which has 50,000 followers.