Questions on Inflation and the Economy? Watch the Quick Clips from Ask the SF Fed

Sylvain Leduc, Director of Economic Research, answered a set of pre-submitted questions from the public on inflation and the economy during our Ask the SF Fed event on February 7.

Questions covered concerns over high inflation, price pressures in specific sectors (such as food, energy, and shelter), layoffs in the tech sector, labor market conditions, a possible downturn in the U.S. economy, geopolitical tensions, and the Fed’s ongoing efforts to restore price stability.

One of the key areas Sylvain discussed was the recent shift in U.S. consumer spending patterns and the changing mix of inflation contributors. During the pandemic, people switched to buying more goods while cutting back on services. Now these trends appear to be reversing, with goods consumption moderating and services consumption rising back toward its pre-pandemic trend line.

Sylvain said this suggests the economy may be normalizing. However, services inflation is becoming a more substantial part of overall inflation and is currently much higher than the pre-pandemic levels during the 2000s and 2010s. This is a concern for policymakers because services inflation tends to be a bit more persistent than goods inflation.

Watch our Quick Clips to see Sylvain discuss these topics and others. These short videos and the full replay of the event are available on the SF Fed – YouTube channel and our Ask the SF Fed event page. You can also download a copy of Sylvain’s slides and subscribe to future Ask the SF Fed event notifications.

Stay tuned for our next Ask the SF Fed in the fall of 2023.

Changing Consumption Patterns

Changing Consumption Patterns. February 7, 2023 (video, 01:11 minutes).


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If you look at these two charts, so goods and services, if you look at goods before the pandemic, we’re kind of moving along what looks like a trend line. The economy is growing, your spending on goods is growing as well. If you look at services, it’s the same thing, it seems to be just chugging along here. And then with the pandemic, things changed completely. Now, we start switching to buying more goods. So, the consumption of goods started growing really fast. And we cut down on the consumption of services, because no one wanted to be impacted by the virus. We didn’t want to go to the movie theater, go to the restaurant, et cetera. And so you got this pattern. What’s interesting right now is that it appears that the economy is normalizing, to some extent. The consumption of goods is coming back down a little bit, and the consumption of services continues to grow towards the trend line, towards where we would’ve been had we just kept going along the trend lines that we had pre-pandemic. The economy seems to be normalizing, and that’s a good thing.

Mix of Inflation Contributors Is Changing

Mix of Inflation Contributors Is Changing. February 7, 2023 (video, 00:54 minutes).


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I talked a little bit about energy, and those are the green columns here. You see that, for a while, in the middle of 2022, the green bars are bigger, because of energy prices that I just talked about at the beginning. Now, those contributors are shrinking as energy prices are moderating. The flip side of this is core services, those have been growing over time. If you look at these bars, core services have just been rising. And the goods price inflation that I just mentioned, those bars have been shrinking. You see that the bars now are smaller than they were a year, a year and a half ago. That’s why there’s so much focus now on services, because they’re becoming a more substantial part of inflation.

Additional Quick Clips

Goods Inflation Is Falling

Services Inflation Remains High

Unemployment Is Lowest Since 1960s

Job Openings Are Plentiful

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The views expressed here do not necessarily reflect the views of the management of the Federal Reserve Bank of San Francisco or of the Board of Governors of the Federal Reserve System.