Fact Check: Is federal spending driving inflation? President Joe Biden and the Democrats are under fire as inflation spikes, accused by Republicans of driving prices higher with reckless federal spending
working its way through Congress. But this spending isn't even approved yet, much less spent. So, when considering inflation, we're only talking about the federal spending that has already made its way into the economy.
The CPI-U rose by 5.4 percent year-on-year in June, according to the Bureau of Labor Statistics, the largest annual increase since August 2008. The monthly rise was 0.9 percent, the largest since June 2008. The first is there was deflation in March, April and May 2020. This fall in prices, linked to the sharp economic contraction at the same time due the pandemic, accentuates the recent inflationary spike in the year-on-year data. It's known as the base effect.that June's inflation would be three percent if it were compared to the same period in 2019, when conditions were normal before the pandemic. Still high, but not nearly as bad as 5.4 percent looks.
"There's just a lot of supply chain disruptions," Bostjancic said."The main issue is you've got a misalignment between supply and demand. "They're willing to do that because for many months we've been cooped up at home and really eager—in some instances desperate—to get back out there. So consumers are willing to tolerate the price increases. That's a unique period," Bostjancic said.
Labor shortages driving up wages may contribute to sustaining the inflationary rise. There is some suggestion, particularly in Republican-governed states, that the enhanced unemployment benefit—part of federal stimulus—is behind the labor shortages.
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