In President Joe Biden’s estimation, the U.S. is in a strong position to overcome the worst inflation in more than 40 years. But so far, inflation just keeps getting the better of the U.S. economy and of the Biden administration. The president’s policies, his deals with the private sector, regulatory actions and public jawboning have failed so far to stop prices from marching upward. Biden on Friday pledged to keep fighting against inflation while touring the Port of Los Angeles, America’s busiest port and a place that the White House said last October would be key for reducing price pressures. “My administration is going to continue to do everything we can to lower the prices for the American people,” the president said after a decidedly bleak new report on consumer prices. The Labor Department reported Friday that consumer prices climbed 8.6% in May from a year ago. That’s the worst reading since December 1981 and a troubling sign for the economy as rate hikes by the Federal Reserve have yet to tamp down inflation as gasoline costs are surging upward. Rising prices are imperiling the U.S. economy as well as Democratic control of the House and Senate, putting Biden on the defensive. AAA separately reported that average U.S. gas prices reached a record $4.99 a gallon, an increase that has overwhelmed the president’s previous efforts to reduce overall inflation. The pain at the pump is hurting Biden’s public approval ahead of the midterm elections. The president on Friday also blamed corporate profits for inflation, saying that some companies — including shipping firms and the oil industry — are focused on maximizing profits. Biden specifically targeted ExxonMobil for not doing more to increase oil production. “Exxon made more money than God this year,” he said. ExxonMobil responded to Biden’s comment by saying that it is producing more oil. “We have been in regular contact with the administration, informing them of our planned investments to increase production and expand refining capacity in the United States,” Casey Norton, a spokesperson for the company, said in an email. “We increased production in the Permian Basin by 70%, or 190,000 barrels per day, between 2019 and 2021. We expect to increase production from the Permian by another 25% this year.” The Port of Los Angeles moved to round-the-clock operations last October under an agreement that the White House helped to shepherd. The goal was to clear backlogs of ships waiting to dock and containers waiting to flow into the country, a logjam that was pumping up prices as the world began to recover from the coronavirus pandemic. READ: Biden says US sending medium-range rocket systems to Ukraine The port is now moving out a record 200,000 containers on a rolling 30-day average. But the forces driving inflation have largely shifted to rising energy and food costs in the aftermath of Russia’s invasion of Ukraine. There has also been a broader increase in prices that go beyond supply chain issues. Housing, airfare and medical services expenses rose significantly in May. Gene Seroka, executive director of the Port of Los Angeles, said there were many levers that caused performance to improve in terms of getting goods to consumers and businesses faster. But he specifically credited the “convening powers of the federal government to bring people to the table” and the Biden administration’s focus on the supply chain. “We’ve reduced those ships that have been waiting to get into the port by 75% this year,” Seroka said. “These guys are really working because we’ve got strong consumer demand still.” The Biden administration is seeking to further reduce shipping prices with a bipartisan bill that the House could pass as soon as next week. The bill would give the Federal Maritime Commission tools to make ocean-based trade more efficient and price competitive, improving the flow of exports and imports. “What I have found here in California is that they want us to do whatever we could possibly do to address the inflation problem — and this is clearly one significant part of the problem,” said Rep. John Garamendi, D-Calif., a sponsor of the bill. Rep. Dusty Johnson, R-S.D., said he saw a need for the additional tools in part after a cheese processor in his state had two million pounds of lactose rot because no carriers would take the product even though 60% of shipping containers were going back to Asia empty. “This is not a silver bullet with regard to inflation,” said Johnson, who sponsored the bill. But he noted that, as the provisions get implemented, “this will absolutely have an impact on inflation.” Strong consumer demand has been a mixed blessing for Biden. It reflects the robust job growth and solid household balance sheets that followed the $1.9 trillion coronavirus relief package passed last year. But demand has consistently outpaced supply, causing prices to rise to levels that are forcing the Federal Reserve to try to slow growth and possibly risk a recession. The White House contends that the U.S. can tackle inflation without stumbling into a downturn because the economy is so strong with its 3.6% unemployment rate that it can withstand a slowdown. Biden is also trying to frame inflation as a global challenge, having been triggered first by the pandemic and then by Russia’s invasion of Ukraine. The president is attempting to rebut criticism by Republican lawmakers that inflation was the result of his government aid being too generous and his restrictions on U.S. oil production too onerous. Biden has attempted to slow inflation by improving port operations and twice releasing oil from the U.S. strategic reserve, in addition to other regulatory initiatives and a domestic agenda that includes budget deficit reduction and would need congressional approval. The visit to the port occurs as Biden has been hosting the Summit of the Americas in Los Angeles. On Friday, he will also announce a declaration on migration and hold a working luncheon with the heads of government and state attending the conference for nations in the Western Hemisphere. And mindful of the campaign season, Biden on Friday will attend two fundraising receptions for the Democratic National Committee.
Americans are doing the main thing that drives the U.S. economy — spending — but accelerating inflation is casting a pall. A raft of economic data issued Wednesday showed the economy on solid footing, with Americans’ incomes rising and jobless claims falling to a level not seen since the Beatles were still together. The spike in prices for everything from gas to rent, however, will likely be the chief economic indicator Americans discuss over Thanksgiving Day dinner. The Commerce Department reported that U.S. consumer spending rebounded by 1.3% in October. That was despite inflation that over the past year has accelerated faster than it has at any point in more than three decades. The jump in consumer spending last month was double the 0.6% gain in September. Read:US reopens to international travel, allows happy reunions At the same time, consumer prices rose 5% compared with the same period last year, the fastest 12-month gain since the same stretch ending in November 1990. “Although consumer confidence has declined in the fall because of high inflation, households continue to spend,” said Gus Faucher chief economist at PNC Financial. Personal incomes, which provide the fuel for future spending increases, rose 0.5% in October after having fallen 1% in September, which reflected a drop in government support payments. Pay for Americans has been on the rise with companies desperate for workers, and government stimulus checks earlier this year further padded their bank accounts. That bodes well for a strong holiday season and major U.S. retailers say they’re ready after some companies, like Walmart and Target, went to extreme lengths to make sure that their shelves are full despite widespread shortages. Analysts said the solid increase in spending in October, the first month in the new quarter, was encouraging evidence that overall economic growth, which slowed to a modest annual rate of 2.1% in the July-September quarter, will post a sizable rebound in the current quarter. That is expected as long as the recent rise in COVID cases and concerns about inflation don't dampen holiday shopping. “After experiencing one of the most severe economic shocks of the past century in 2020, the U.S. economy has displayed one of the most rapid recoveries in modern history in 2021,” Gregory Daco, chief U.S. economist for Oxford Economics, wrote in a note to clients. Daco predicts GDP in the current October-December period would rebound to a growth rate of 5.6%. The number of Americans applying for unemployment benefits, meanwhile, dropped last week by 71,000 to 199,000, the lowest since mid-November 1969. But seasonal adjustments around the Thanksgiving holiday contributed significantly to the bigger-than-expected drop. Unadjusted, claims actually ticked up by more than 18,000 to nearly 259,000. In a cautionary note Wednesday the University of Michigan reported that its consumer sentiment index fell 4.3 percentage points to a reading of 67.4 this month, its lowest level since November 2011, weighed down by inflation concerns. And there are regions in the U.S. experiencing a surge in COVID-19 cases that could get worse as families travel the country for the Thanksgiving holiday. President Joe Biden acted Tuesday to counter spiking gasoline prices by ordering a release from the nation's strategic petroleum reserve, but economists expect that move to have only a minimal effect on the surge in gas prices. Read:Mar-a-Lago-trespasser deported to China 2 years later The Fed seeks to conduct its interest-rate policies to achieve annual gains in its preferred price index of around 2%. However, over the past two decades, inflation has perennially failed to reach the Fed's 2% inflation target. Fed officials at their November meeting announced the start of a reduction in its $120 billion per month in bond purchases which the central bank had been making to put downward pressure on long-term interest rates in order to spur the economy. Minutes from that meeting showed Fed officials increasingly concerned that the unwanted price pressures could last for a longer time. Officials indicated that the Fed should be prepared to move to reduce its bond purchases more quickly — or even start raising the Fed’s benchmark interest rate sooner — to make sure inflation does not get out of hand. The reduction in bond purchases marked the Fed's first maneuver to pull back on the massive support it has been providing to the economy. Economists expect that will be followed in the second half of 2022 by an increase to the Fed's benchmark interest rate, which influences millions of consumer and business loans. That rate has been at a record low of 0% to 0.25% since the pandemic hit in the spring of 2020.
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