13 Comments
Aug 27, 2022Liked by Joseph Politano

There are multiple likely explanations:

First, the data is preliminary and still adjusting to COVID-related changes to the surveys.

Second, CPI and PCE inflation surveys had to adjust methodology in March 2020.

Third, trade imports has temporarily surged in official statistics because of supply chain bottlenecks.

I could go into more detail, but the overall point is that:

1. GDI/GDP average reflects the recent economic performance better than GDP or GDI.

2. Price surveys are backwards looking, using slightly outdated baskets. Prices today are likely higher than the GDI/GDP estimates say.

3. GDP tends to decrease (on net) from import surges while GDI increases (on net). This shouldn't be true on an annual basis but it is on a quarterly basis. Just depends on when the customs agency books the import & export.

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Aug 27, 2022Liked by Joseph Politano

Why this statistical discrepancy seems to start mid 2020 may be of relevance?

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Enlightening piece!

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One persons spending does not equate another persons income if earned money is sent to family abroad.

Is earned money spent on illegal drugs counted ?

Is money earned "under the table" counted ?

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Occam's razor would suggest labor shortages have driven inflation and GDI is overestimated. NPR did a great piece about women leaving the workforce. There is no way to not sound chauvinistic here, but if a lot of people leave the workforce; it may take awhile for that arrow to land in the reporting,

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Isn’t it possible that PPP forgiveness created money out of thin air and that this created the market mismatch that caused inflation to rapidly grow? All it would take to account for this is a bit of hand waving that estimates the unnecessary PPP

loans (those that were unwarranted by economic circumstances but legal under the rules established by Congress to measure proper forgiveness). That there was a trillion dollar mismatch here should come as very little surprise to anyone who remembers that the decision to give forgiveness was made in a roughly 4 week period during the initiation PPP design. The problem compounded when 2nd and 3rd rounds of relief were initiated by Congress.

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