Inflation explainer: What rising prices mean for San Diego
Speaker 1: (00:00)
Prices at the gas pump and the supermarket are bringing home the big headlines about inflation and those headlines have been screaming about the highest inflation rate in 30 years, a 6.2% jump in the consumer price index and price hikes are even higher on individual items like gas, groceries, and automobiles. The truth is right now, many Americans have more buying power than there are goods to buy. So inflation, the question is, did bad policies create that situation? And can it be turned around any time soon? Johnny is Alan gin, economics professor at the university of San Diego and professor gin. Welcome to the program. Thanks for having me. Where are San Diego and seeing the biggest consumer price increases
Speaker 2: (00:48)
Food at home is up, uh, nationally, uh, over 5%. Um, if, if you're looking at the individual components of that index in particular, what I would call the proteins have been up considerably. So in the category, meat, poultry, fish, and eggs, that's up almost 12% year over year. Uh, these are national numbers as opposed to San Diego numbers, but I think the San Diego numbers will hopefully reflect what's happening, uh, across the country. So again, food is one area of where, where, where there's, there's a big impact. As you mentioned also though, uh, gasoline, uh, nationally gasoline is up almost 50% compared to a year ago. And we just recently in California here hit an all time high in terms of the average price per gallon
Speaker 1: (01:31)
And our situation here in San Diego, unique in any way, making us more or less prone to inflationary pressures.
Speaker 2: (01:39)
I think that would be unique about San Diego is that we're kind of a cul-de-sac. So we're at the end of the line, as far as the supply chain is concerned. And if there are disruptions in the supply chain that could affect us here. Uh, another thing that we have the unique to San Diego, uh, but not unique to coastal California is the high housing prices. And we have here even during the pandemic, uh, the housing market remains strong and as we're coming out a bit, then what we're seeing, we're just seeing that the cost of housing is soaring.
Speaker 1: (02:09)
Remind us what the pressures are. That's creating this inflation. Why are these price increases happening?
Speaker 2: (02:15)
There's a wide series of events that's causing a disinflation. We go and take a look at the food side. There's been a number of weather related incidents that are occurring just around the world. Uh, for example, there was this big heat dome earlier in the year over, uh, north America. And that has devastated the, uh, [inaudible], um, not just in the U S but in Canada as well. It's been estimated that the Canadian wheat harvest is going to be down 35% this year, compared then compared to what was, uh, forecast. And, and so, uh, not only does that have an impact on stuff made out of wheat, but it's affecting of the price of feed, for example, because the corn crop has been affected as well. And so that has affected the price of meat. As I mentioned earlier, meat is up almost 12% compared to last year.
Speaker 2: (03:07)
And a high feed costs are, are one reason, uh, as far as that's concerned, but, uh, there's also been problems as far as the supply chain. Um, we've got problems with the supply chain. Offloading of ships is difficult, uh, just problems all up and down the supply chain. Uh, there's a shortage of drivers of trucks. Uh, there's also shortages of labor at, uh, warehouses and distribution centers. And so that is hurting the distribution of goods and that's leading to shortages and prices to rise. And then finally, uh, there's been a labor. Uh, there's been a problem as far as labor is concerned, uh, in, in the, in the sense that there's a lot of job openings, but not enough people to fill those job openings in 2020 and extra 2 million people retire compared to what was projected. There are also a problem with women coming back to the workforce due to childcare issues. So that prayed a lot of job openings. And as a result, people are leaving their jobs at a record rate, a report just came out last week, that September we had an all time high in terms of the number of number of people quitting their jobs. And this is now we're having trouble finding workers. Uh, they have to be higher wages, and that is also contributing then to an increase in places. No,
Speaker 1: (04:17)
Could we see this inflation as kind of the flip side of the good news that we are not in a pandemic risk?
Speaker 2: (04:24)
I think that's definitely the case. Uh, you know, part of the reasons why we have such a high rate of inflation compared to last year was that price of what were depressed, uh, last year, uh, for example, uh, the prices of use cars well that's because the used car market was the press last year due to the fact that rental car companies were offloading their fleets because nobody was renting cars because travel was down. Uh, and now those rental car companies are having to rebuild their fleets. As a result of that, uh, the price of used cars is up, is up considerably. I actually did the price of used cards up about 25% compared to compared to last year. It's the rental rates that, that are up about, uh, about 40%. But if you can apply this into all parts of the economy, uh, the fact that the gas prices are so high is due to the fact that the economy is open now, and people are driving. Businesses are operating. We have production in factories that has driven the price of oil from less than $10 a barrel at the bottom of the recession last year to over $80 a barrel. So the price of oil goes from $10 a barrel to over 80. That's going to cause gas prices to increase. But again, that's the consequence of the world economy reopening have government
Speaker 1: (05:36)
Policies triggered inflation.
Speaker 2: (05:38)
That's a difficult thing to say. A lot of people, uh, for example, thought that these extra payments that people were getting due to, uh, unemployment insurance, uh, was keeping people out of the labor force, but now those expired in September and we're still having then a shortage of labor. So there were other factors in that that caused them that shortage of labor. We did have a stimulus package the review of this year, so that put money more money then in people's hands. So will that help revive the economy? But as you mentioned, there's a trade off thing as the economy revives, uh, people want to spend that money and that, that could be then tightened up, backing up prices. Could the government,
Speaker 1: (06:15)
I do more to stop rising prices. I mean, could they increase interest rates for example,
Speaker 2: (06:20)
And it is a job Ben for the federal reserve and technically the federal reserve then is independent from the government. And so, uh, at this point, the, the federal reserve has held the line as far as interest rates are concerned. I think that you'll see interest rates are rising in 2022, um, maybe up to, up to a half a percent. Uh, and so that will help in terms of pulling down a dip of inflation. Um, it will float the growth of the economy a little bit, but, but I think there's enough underlying strength in the economy that, that, uh, it can take it,
Speaker 1: (06:49)
What things might've be a good idea to postpone purchasing right now.
Speaker 2: (06:53)
Yeah. So, so what happened was that during the pandemic, uh, when things were shut down, people spend more time at home. Uh, either they were out of the job or they were working from home. And as a result of that, people started buying stuff related to the whole furniture, uh, appliances, the teepees, uh, computers, things, things like that. And as a result, uh, that has caused a shortage in those areas because the factories that were producing other goods had to be retooled in order to produce the goods that people wanted. And so that is also causing some of the problems that we're having been in the supply chain, but that's caused the price of things like computers and furniture to rise considerably. And so I think if you can put off buying in those areas, I think we'll see prices come down in the future as the supply chain gets itself sorted out.
Speaker 1: (07:44)
And when do you think this inflation bubble will start to
Speaker 2: (07:46)
Deflate? I think we're going to see in 2022, that the prices will still be rising faster than, than desired, but the rate is going to be, um, as you mentioned in the last report had inflation at 6.2%. I think we'll see inflation into the three and 3% range in 2022. Uh, that's still higher than the target that the federal reserve usually has a 2%, but I think we'll see a lot of the issues in the supply chain sorted out, not completely. And also then some of these would these unusual comparisons to a depressed year reverse themselves.
Speaker 1: (08:20)
Well, I've been speaking with Alan gin, professor of economics at the university of San Diego, Alan, thank you very much.
Speaker 2: (08:27)
Food and gas prices have risen drastically in recent months and the inflation rate has reached its highest rate in 30 years.
Alan Gin, professor of economics at the University of San Diego, joined Midday Edition on Tuesday to talk about what the higher inflation rate means for us in San Diego, as well as some of the causes and impacts.
Food prices, particularly proteins, and gas prices have been especially hard hit.
"So, in the category of meat, poultry, fish, and eggs- that's up almost 12% year-over-year," Gin said. "Nationally, gasoline is up almost 50% compared to a year ago, and we just recently, in California here, hit an all-time high in terms of the average price per gallon."
As supply chain worries continue, and the holidays approach, Gin explained how San Diego's geography makes it vulnerable to further disruptions.
"The thing that would be unique about San Diego is that we're kind of a cul-de-sac, so we're at the end of the line as far as the supply chain is concerned. So, if there are disruptions to the supply chain, that could affect us here," he said.