Thread by @RepDonBeyer

There's been a lot of talk about inflation, especially on days like today when we get consumer-price index data.

The top driver of price increases right now is cars. I know a few things about the auto industry, so let's look under the hood at what's going on with inflation. 1/

First, quick background on the economic conditions: they are extremely promising.

CBO projects record GDP growth, workers' wages are rising, we've added 3 million jobs so far this year, unemployment is falling sharply, and on Thursday the enhanced child tax credit kicks in. 2/

For over a year many Americans couldn't travel and were worried about the economy and their personal finances. Now we have the virus on the run, the American Rescue Plan is putting money in people's pockets, and many are ready to travel again. That brings us back to cars. 3/

Cars, as I said, accounted for a huge percentage in the price increases we are seeing right now. Without these automotive industry-related price increases, June's monthly inflation was right in line with Fed targets. 4/

https://twitter.com/hboushey46/status/1414942568933101568

If you talk an auto dealer they will tell you that this year is a time unlike anything they've ever seen. People have had money to spend, and many were trying to rely less on shared transit like trains and ride shares because of pandemic concerns. Cars have been VERY popular. 5/

Rental companies that sold off much of their fleets during the pandemic scrambled to replace them. This was at the same time that regular people were trying to buy new and used cars, creating an incredible surge in demand. 6/

At the same time, the auto industry had a huge and unexpected hit to demand: the chip shortage. The freeze in Texas and a factory fire in Japan put a big squeeze on an essential component for car manufacturers, made worse when some countries started hoarding their chip supply. 7/

If you understand the basics of supply and demand you know what was sure to follow: prices went through the roof. But both supply and demand conditions are temporary, so you can also predict what will probably happen next: prices fall again. Sure enough 8/

https://twitter.com/JECDems/status/1415020532941066240?s=20

This spring we saw car dealers with empty lots. That isn't normal, and it isn't going to last.

This is true of many of our other drivers of inflation right now as well. The Fed expects many of the price increases we are seeing now to be temporary. 9/

https://twitter.com/JECDems/status/1415020534149095424

Republicans were tripping over themselves to talk about how rising lumber prices proved President Biden's policies were to blame for rampant inflation. Then lumber prices fell; they are down for the year now. Funny, we aren't hearing much about that now 10 bloomberg.com/news/articles/…

Republicans have also been blaming President Biden for rising gas prices, a thing that happens every summer when drivers take to the road and was bound to be especially acute after so much pent up demand for travel. It is a bunch of malarkey: washingtonpost.com/politics/2021/… 11/

Many of the price increases we've seen, for instance airfares and hotel rooms, are rising sharply now only after falling drastically during the pandemic. Airfares and hotel rooms are actually *lower* right now than they were just two years ago:

https://twitter.com/WSJecon/status/1414969719560589312

12/

I am not at all surprised to see my Republican colleagues distort economic data for political gain. They are rooting economic pain and President Biden to fail, they want to capitalize politically off of economic suffering.

But you shouldn't be fooled, the recovery is strong. 13/

Fed Chair Powell is joined by most of America's leading economists in believing these inflationary pressures we are seeing now will be transitory. The bottom line is that the fundamentals of our economy point to a strong recovery. More on that here: 14/14

https://twitter.com/WhiteHouseCEA/status/1414940727088402438

Meant to say “hit to supply” of course, apologies! Thread continues here:

https://twitter.com/repdonbeyer/status/1415060323393019910