How The Price Of A Toyota Truck Helps Explain Surging Inflation

June 10, 2021 ☼ inflationbidensupply-chainpandemic

Source: NPR - Link

Prices are being driven higher by supply chain snarls that are leading to shortages of key components such as computer chips for cars, hence the higher price that Toyota wants for its pickups.

At the same time, the rapid rollout of COVID-19 vaccines is sparking a surge in pent-up demand after a year of home confinements, and those who can afford it are willing to pay up.

Both the Biden administration and the Federal Reserve argue that the jump in inflation is likely to be short-lived. Some prices, like hotel rooms, are just getting back to normal, after a steep plunge during the pandemic. Others are the result of temporary bottlenecks that should work themselves out as supply catches up to demand.

Rising labor costs are pushing prices up in some areas, but officials don’t believe that’s the beginning of a runaway, upward spiral, like the U.S. experienced in the 1970s. Chipotle said this week it’s raising menu prices about 4% to help cover its new $15-an-hour average wage for employees.

Some inflation is inevitable with demand and prices suppressed for a year. But inflation tends to embed itself in the psyche. Once there is it hard to get rid of.