Daily Breitbart Economic Note -- April 30, 2021

Breitbart Business Digest, April 29, 2021, 1Q21:

John F. Kennedy once said that "a rising tide lifts all boats." 

The aphorism was intended to express the idea that we all share a common interest in an improving economy. Now, however, it may be true in a more literal sense. NBC Connecticut reports that demand for boats is at unprecedented levels as Americans scramble to make summer plans in a country still inflicted with covid restrictions and mask requirements even as actual covid infections fall. 

In fact, demand is outpacing supply, and boat salesmen say they are having a hard time getting their hands on product for customers.

That's becoming widespread through the economy. Microchips are in short supply, and as a result, automakers are having trouble producing enough cars to meet demand. That's sent so many buyers into the used car market that recent vintage used cars are actually appreciating in value, with many models from the last five years worth more today than they were when they were two years newer. Demand for housing has outpaced supply, pushing up home prices even as sales volumes drop and sending builders scrambling to break ground. That, in turn, has caused a run on lumber, sending prices skyrocketing.

The last round of stimulus payments, arising from President Biden's $1.9 trillion American Rescue Plan, pumped household incomes up a record 21.1 percent in March, the Commerce Department said Friday. While some of that money is finding its way into the hands of home sellers, boat marketers, and auto dealers, much of it is being saved. 

The savings rate jumped to 27.6 percent, the highest ever recorded apart from last April's lockdown and stimulus-induced record of 33.7 percent. Prepandemic, this tended to run around 7 percent.

The Fed's Jerome Powell has repeatedly assured us that any price rise from all this money sloshing around through the economy will be "transitory" and not lead to the kind of sustained high inflation that would trigger a sudden rate hike. 

On Friday, however, Richard Curtin—the venerable doyen of the University of Michigan's Survey of Consumers—raised doubts about that. 

"While temporary price hikes are anticipated, the robust increases in consumer demand will act to lengthen and heighten inflation above the modest increases now anticipated," Curtin wrote in his analysis of the better than expected rise in consumer sentiment in April.

The market seems convinced right now that Team Powell will be proven right, and so asset prices do not seem to reflect much inflation risk. That's likely a reflection of the fact that inflation has been so low for so long and that predictions of coming inflation have made fools of many prognosticators for at least two decades. 

But that also means that it's likely more investors will be caught without a life-preserver to keep them afloat if a rogue wave of inflation hits.

– Alex Marlow & John Carney
Breitbart News Network