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January 2022

Solid Real GDP Growth to Close Out 2021

Real GDP grew at a robust 6.9% in the fourth quarter of 2021, according to the advance estimate from the BEA.  Combined with growth from the first three quarters, this means 5.7% for the entire year 2021. The graph below shows that real GDP is now almost all the way back to its pre-COVID path.


This data indicates a very strong year of growth for real GDP in historical terms.  But, of course, 2021 was not a normal year.  Coming on the heals of shutdowns in 2020, there was a lot of ground to be made up. Still, with unemployment now below 4% and real GDP growth at almost 7%, it seems like the economy was humming along nicely at the end of 2021.  That is, just before the Omicron variant of COVID-19 really spread at the very end of the year.  It will be interesting to see how growth in the first quarter of 2022 is affected by Omicron.  We can certainly hope that the effects are temporary.

Inflation Climbs to Highest Level in 40 Years

The new CPI data released today by the BLS shows what many of us are feeling when we buy gasoline and groceries: inflation is here and it is not going away immediately.  The year-over-year measure was up to 7% in December 2012 and this is the highest level since June 1982.  The graphic below shows annual inflation since 2000.

Inflation 0122

The table below, from the BLS report, shows increases in the major category areas.  Year-over-year increases are shown in the last column.

CPI categories 0122

Over the course of the year, you can see that gasoline prices rose 49.6% and Used cars and truck prices rose by 37.3 percent.  But even grocery prices (food at home) rose by 6.5 percent.  

This inflation won't go away anytime soon.  Even if prices don't rise at all for six months, the inflation rate will be over 4% in June because of the way this statistic is computed (using all data from the previous 12 months).  Unfortunately, prices are probably going to continue to rise throughout this spring.