White House seeks to 'provides context' before CPI report is released

U.S. Economy

Wooden blocks with "CPI" text of concept and coins. — Seiya Tabuchi/iStock via Getty Images

The White House appears to be preparing the nation for a red-hot inflation report Wednesday morning as the Bureau of Labor Statistics releases its latest Consumer Price Index. The headline figure is expected to show an annual gain of 8.8% for June, which would mark the strongest figure in 41 years. Core CPI, excluding food and energy, is forecast to decline for the third month in a row - from 6% to around 5.7% - though the slight dip is not expected to meaningfully change a Federal Reserve keen on hiking rates aggressively.

Snapshot: As inflation becomes one of the top priorities for Americans, especially ahead of midterm elections, Biden administration officials held a briefing for reporters to "provide context" for the upcoming CPI report. It "will largely not reflect the substantial declines in gas prices we've seen since the middle of June," because that data "captures the average price over the course of a month," said National Economic Council Director Brian Deese and Council of Economic Advisers Chair Cecilia Rouse. Headline inflation has been "heavily driven" by Russia's ongoing war in Ukraine, but "our economy created 372,000 jobs in June, in line with the monthly average in the rest of the second quarter."

"Simply put: This is not what a recession usually looks like," they wrote in an accompanying memo. "While risks are elevated, the strength of the labor market - in addition to other factors like strong household balance sheets - puts the U.S. economy in a better position than many other countries to transition from an historic recovery to lower inflation and stable and steady growth. The best thing Congress can do to improve our chances of accelerating price normalization and successfully transitioning to stable, steady growth is to pass legislation that lowers costs for families - from prescription drugs to utility costs - while reducing the federal budget deficit, in addition to passing the Bipartisan Innovation Act."

Path of monetary policy? "I think the question later this year is what if this is just a near-term peak and not the absolute peak?" said Michael Gapen, head of U.S. economics at Bank of America. "We think it is unlikely that June CPI will be the first in the string of softer inflation prints that Fed officials focused on observing before shifting away from a very hawkish policy stance," added Citi economist Veronica Clark. "Over the coming months, however, there are some downside risks to CPI from softer goods prices and for cars in particular. Details of monthly CPI prints could become increasingly important for signs that underlying inflationary pressures in services is slowing."

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@rbrucer

yes, the sociopath appointees, mostly in the WH, are clearly responsible for reigniting dangerous inflation. But they will NEVER own up to that error. NEVER

And ole Joe only sees inflation as a campaign season problem.

He wants a short-term optics fix tailored for November perceptions. That means he is seeking the proper response to public ire in skillful "messaging". To inside the beltway types, "clever messaging" means a "manipulative narrative".

The damage inflation does to the real economy, to industrial productivity, to labor input prices, to rational long term planning, sane management, all these seem to be outside the President's mid-20th century worldview.

The FED kept rates near zero for more than 10 years WITHOUT igniting inflation . Let's remember that.

But the pandemic clearly demanded at least some fiscal stimulus.

The good quality stimulus came in two helpful parts: safety net and infrastructure spending.

The safety net for people thrown out of work by the political decision to lockdown many productive enterprises. And infrastructure spending to replace long neglected roads, airports, harbors, rails, grid, rural wifi, and even some pump priming for EV charging stations.

But the Administration then took fiscal stimulus spending a few partisan steps too far. What a shame !

They gave away about a 2/3 of a TRILLION in stimulus checks, including to people who were still working, couples making 6 figures even, voters who did not require such a reckless hand out. And next the WH tried to ram through a huge, reckless over-sized social agenda, the much-storied, and tragic, Build Back Butter agenda (BBB).

Fortunately, BBB stalled-out, with insufficient Congressional support, because moderate sanity derailed the massive spin - messaging optics blarney campaign.

The inflation we have today would have been so much worse if that monstrosity had gone through.

American inflation was re-ignited in the 21 st century by a too massive, and insufficiently targeted, fiscal stimulus. And half of that planned ruinous over-stimulus was effectively derailed by just 2 DEM senators, .... thank goodness.

Now, about gasoline,....
Very high priced retail fuel just helps the President sell his longer term EV claims. He genuinely NEEDS EXPENSIVE gasoline, ...... to sell his sustainable vision,...... EXCEPT not so close to elections.

So he needs to deflect the responsibility for 2nd half 2022 expensive gasoline onto others. For example, onto his most reliable enemies, onto "big oil" or "big banks" or some other convenient 'big boogie man'. Putin will do nicely. Or, McConnell, or someone such as that.

Certainly, no one in the WH should be blamed for expensive gasoline or any inflation. Oh, no. The lack of sufficient US refining capacity has nothing to do with regulatory (EPA and other) obstructions that stopped new construction for more than 15 years.

Ask Carl Icahn about how certain regs stopped his investment in new refinery capacity just 2-3 years ago. If he had made that investment back then, then US gasoline might still be 3.00 a gallon today. There is plenty of domestic crude to refine more distillates. The bottleneck is the refinery capacity.

So what if refining inadequacy forced Americans to buy Russian refined products to serve US demand in the NE? How could that reliance hurt US citizens, or EU citizens, or anyone? How ? I'll let the reader ponder that one.

The above may explain why the President's energy solutions approach is so schizo, so incoherent. And why he is now trying to persuade the Saudi Prince, whom he disdained so rudely 15 months ago, to please, please sell more product to the EU or to the US or to anyone who can refine it.

The refining bottleneck is one of the key drivers of rising US prices. Yes, there are others. What? Selected semi-conductors, and not necessarily the most sophisticated ones. The world auto industry is hampered by shortages of a dozen different types of fairly pedestrian semi-conductors. WE can and should be fabricating these domestically. No, they US sited capacity cannot be replaced quickly. But it can and should be replaced. Chips act anyone?

The real economic solution, even if it takes 2-3 years, is to build more US based refining capacity, and semi-conductor fabrication capacity, enough for ourselves and our allies. Is the WH interested in real solutions?

Remember, Joe only needs more gasoline for a few months, until November. He wants the longer term price to remain high, remember? So that expensive, range-limited EVs look better in comparison to ICE vehicles. Keeping gasoline prices sky-high is their answer.
That's the brilliant EU climate plan, remember?