Politics

2021 Was the Year of Bro-flation. What Will 2022 Bring?

Bro-flation.
2021 was just absolute murder for tailgaters. Illustration by Slate

Last year, inflation made a big, politically roiling comeback after a decade in which it had been mostly subdued.

Supply chains got tangled. Consumer demand surged (with the help of stimulus checks). And buying a couch or groceries suddenly became a lot more expensive.

Rising prices have become one of the chief complaints among voters, and a major reason why a majority disapprove of Joe Biden’s handling of the economy despite a strong job market.

Ultimately, though, a close look at the jump in consumer prices in 2020 reveals that it was disproportionately concentrated in just a handful of categories: Cars and trucks, gasoline and other oil products, and meat. Those three buckets were responsible for nearly 70 percent of the “excess” inflation America experienced—meaning the increase in the Consumer Price Index above its pre-pandemic trend. That’s according to calculations by journalist Matthew Klein, who writes the indispensable economics Substack The Overshoot.

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I happen to be a sucker for groany portmanteaus. So ever since reading Klein’s analysis, I’ve personally begun thinking of 2021 as the year of bro-flation, the year when throwing a tailgate party suddenly got costlier. Frat guys and Packers fans obviously weren’t the only Americans who felt the sting of higher prices—putting dinner on the table, purchasing gasoline, and making car payments are all important line items in a normal family budget. But if you wanted to imagine a specific loser in last year’s economy, you could do worse than picturing a guy who just wanted to buy a truck, fill it up, and toss some burgers on the grill.

One thing that these three categories all had in common is that they suffered from significant supply problems. Auto manufacturing crashed thanks to a shortage of semi-conductors and has yet to recover — which put unprecedented stress on the used car market too. The pandemic hobbled and shut-down meat processing plants as crews got sick, limiting their production. (The Biden administration has also accused the country’s four major meat packers of profiteering, since their margins soared while prices paid to farmers fell). Oil supplies have gotten tighter as the world reopened from COVID, since drilling didn’t keep pace with new demand.

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(A little digression for anybody who’s really into details: Many economists will tell you that these supply chain issues wouldn’t have made as big a difference in overall inflation if the Biden administration hadn’t passed a giant relief bill that put so much more disposable income in Americans’ pockets. Without that, they argue, we would have seen a change in so-called “relative prices.” Some items would have gotten more expensive. But as a result, others might have gotten less expensive, since Americans collectively would have had less money left over to spend them. Therefore, total inflation wouldn’t have jumped as much. Personally, I don’t think that’s entirely wrong—obviously, stimulus money created more demand from shoppers—but it also ignores some realities. If Biden had never mailed out stimulus checks, for instance, it is totally possible that America’s truck buyers would have just taken out bigger auto loans or cashed out more savings and spent the same amount on everything else.)

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That all said, bro-flation is not the entire story from last year. For instance, housing costs added more to inflation than they did the year before the pandemic, as you can see in the chart below, and the grab bag category I’ve labeled “everything else” jumped quite a bit too. What’s more, inflation was still going strong by end of 2021, even though meat and gasoline prices had begun to fall. The cute portmanteau doesn’t explain the whole economy, just a big chunk of it.

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Sources of inflation
Jordan Weissmann/Slate
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If 2021 was the year of tailgating expensively, what will 2022 be? We’re set to get our first clues on Thursday, when the Bureau of Labor Statistics releases its inflation data for January. But it’s a bit hard to make predictions at the moment.

One thing almost everybody has their eye on, however, is rent. The cost of housing, as measured by the Labor Department, stalled in 2020 and still hasn’t caught up to its pre-pandemic rate of growth. If it does, that’ll add some extra inflationary pressure.

Housing costs
Jordan Weissmann/Slate
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As for meat, fuel and cars? When it comes down to oil and gasoline prices, all eyes are on the Ukraine crisis. If war breaks out there, it could lead to worldwide disruptions in energy supplies (it’s even possible Russia would cut back on oil production, just to put the screws to Europe and the U.S.). Meat prices seem to be dropping for the time being, but at this point, nobody seems certain when the auto production will get straightened out. It’s possible we’ve slammed the cooler’s lid on bro-flation, but it could keep trucking.

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