Owatonna, MN Correspondent — A combination, and the useful thing about answering in December rather than in June is that the shape has become visible.
Goods inflation has come down sharply. Used cars are falling, freight rates have collapsed back toward pre-pandemic levels, and the supply side is healing on its own. Services inflation has not, and services are wages.
That split is the diagnosis. The supply shock is resolving and the demand component is the part still running, which means the remaining work belongs to the tool that addresses demand.
Dayton, Ohio Correspondent — Bottlenecks were real and I lived inside them. Chip allocation cost us production and the freight market was unrecognizable for eighteen months.
They don’t explain the breadth. Prices moved in services with no supply exposure at all, and that’s the part attributable to demand.
What I’d note now is that our input costs have largely normalized while our labor costs haven’t. Steel is back near where it was. Wages aren’t going back, nor should they, but they’re the persistent piece and everybody arguing about ports two years ago should say so.
Sydney, Australia Correspondent — Supply started it and demand spread it, and the comparative evidence is fairly clean by now.
Australian inflation peaked lower than yours and later. Our fiscal support was proportionally similar in size and different in form — a wage subsidy that kept people attached to employers rather than transfers into household accounts.
The countries that transferred cash directly got more goods demand and more inflation. That’s about as close to a natural experiment as macroeconomics offers, and it suggests the composition mattered as much as the total.
Gastonia, NC Correspondent — Both, and the argument about which has been conducted in bad faith by everybody.
For a year one side insisted it was entirely supply and corporate greed, and the other insisted it was entirely spending. Neither was ever going to be true and both camps knew it.
What I’d say as somebody who edits copy is that the word “transitory” did more damage than the mistake it described. A wrong forecast is ordinary. A wrong forecast defended for a year, then abandoned without an accounting, is how you lose the ability to be believed on the next one.
Tyler, Texas Correspondent — Both, and anyone selling one story is selling a team.
Supply shocks are real — freight, chips, energy after the invasion, a labor market that didn’t return on a briefing. Excess demand is also real: transfers that outlived the closure and money cheap enough to train every bid to assume a rescue.
You don’t fix a missing transformer with a lecture about greed and you don’t fix a flood of demand with a press release about ports. Two problems, two tools, same paragraph.
My clients pay both stories at the parts counter.
Knoxville, Tennessee Correspondent — A county bid this year is a short story about diesel, copper, and a crew that wants more because rent wants more. That’s supply and demand in one sentence.
If you only chase the shocks you leave the money loose and blame the war. If you only chase demand you ignore a substation that can’t get a breaker on an eighteen-month lead time.
The lead times are the part that hasn’t healed. Freight is fine now. Electrical equipment is not, and no interest rate fixes a transformer queue.
Cheyenne, Wyoming Correspondent — Too much money and not enough diesel. Both.
Raise the price of money. Make the diesel exist.
One speech won’t do it and one tool won’t either.
Las Vegas, Nevada Correspondent — Rooms, construction, and the plate. I can feel a shock and I can feel a bid that was taught money would stay a story.
The local reading is that the goods part is over and the wage part isn’t. What I pay a housekeeper isn’t going back and I’m not proposing it should.
So the remaining inflation here is a service economy that repriced labor after a decade of not doing so, and calling that a supply shock or a stimulus artefact both miss it.
Orange County, California Correspondent — The decomposition matters because it determines whether tightening is the right instrument.
The estimates I find credible put roughly half of the excess on demand and roughly half on supply, with the balance shifting toward demand over this year as supply healed.
The uncomfortable implication is that the demand half is the half a central bank can reach, and it’s now most of what’s left. So the tool is correctly aimed and it will do its work through the labor market, which is the part nobody wants to say in a sentence with the word “successfully” in it.
Novi, Michigan Correspondent — From inside a supply chain, the shock was genuine and it’s over.
Semiconductor allocation is easing, container rates are down by something like eighty percent from the peak, and we’re building to schedule again for the first time since 2020.
What’s left is labor and energy. Neither is a bottleneck in the sense the word was used in 2021, and treating them as one is how you talk yourself out of the tightening that’s actually required.
Bismarck, ND Correspondent — Both, and the farm version is instructive because the two are visible separately.
Fertilizer doubled on an energy shock and a Russian export problem. That’s supply and it’s easing.
Land prices and equipment moved on cheap credit and record receipts. That’s demand and it hasn’t eased, and it’s the part that sets whether an operation that expanded in 2021 survives a refinancing at these rates.
Long Island, NY Correspondent — A combination, and I’d add the piece that’s been argued badly by both sides.
Corporate margins did expand during this period. That’s in the data and it isn’t a conspiracy theory. It also isn’t evidence of a sudden outbreak of greed, because firms are always as greedy as they can get away with and what changed was what they could get away with.
What let them get away with it was demand that didn’t fall when prices rose, and demand that doesn’t fall when prices rise is the definition of excess. So the margin story and the demand story are the same story told by people who dislike each other.
