Latest news with #DavidAndolfatto
Calgary Herald
21-07-2025
- Business
- Calgary Herald
The pandemic drove up inflation. How come, years later, we're still paying more?
Article content A new report from the C.D. Howe Institute concluded that the Trudeau government's spending splurges played a major role in fuelling inflation during the pandemic. The report pointed the finger at Ottawa's unfunded spending spree — more than the Bank of Canada's monetary policies — that acted as 'helicopter drops' of money for the private sector. Article content In 2020, about 20.7 million Canadians out of an adult population of 30.3 million received income from one of the federal pandemic-related programs, according to a 2022 report. During that year alone, the programs are estimated to have cost $270 billion — about 12.5 per cent of Canada's gross domestic product (GDP) — and cumulatively have cost about $360 billion to date. Article content While the programs broadly succeeded in providing relief to individuals and businesses and creating a cushion for the economy during a crisis, the C.D. Howe Institute noted that injecting that much extra money into an economy while unemployment is low results in inflation. Article content Article content David Andolfatto, chair of the department of economics at the University of Miami and an international fellow at the C.D. Howe Institute, said inflation should be expected when governments add that much extra demand to the economy. 'Of course prices went up,' he said. 'There's no such thing as a free lunch. Somebody will have to pay.' Article content And not only do consumers pay higher prices but they must then pay again with the higher interest rates the central bank then implemented to try bringing those prices back down. In 2020, interest rates were down to 0.25 per cent as the Bank of Canada aimed to cushion the blow from the pandemic; by 2023, the rate had risen 20-fold, to five per cent. Article content Jean-Francois Perrault, chief economist at the Bank of Nova Scotia, estimated in a November 2023 report that government spending and pandemic-era transfers to Canadians were responsible for about 42 per cent (200 of the 475 basis points) of the increase in the Bank of Canada's prime interest rate during that period. About one-third of those interest rate hikes can be traced back to provincial governments, he calculated. Article content Article content Since the start of 2023, inflation has remained at less than four per cent, just over the Bank of Canada's preferred band of between one and three per cent, but a big decrease from the peak of pandemic-era inflation. Article content And, at least for now, it's largely under control. Statistics Canada reported last week that Canada's inflation rate accelerated to 1.9 per cent in June, up from 1.7 per cent the previous month. Article content Why have some prices kept rising since the pandemic? Article content When the pandemic subsided, it removed a number of shocks and disruptions to markets. But not all of them. Article content The Russian invasion of Ukraine, for example, still hasn't been resolved. Many of the people who started working from home during the pandemic still do so, either part-time or full-time, which puts a little more money in most of their pockets. The glut of baby boomers is also at the stage of life where many are retiring, having saved up their money, and now want to spend it.
National Post
21-07-2025
- Business
- National Post
The pandemic drove up inflation. How come, years later, we're still paying more?
Article content While the programs broadly succeeded in providing relief to individuals and businesses and creating a cushion for the economy during a crisis, the C.D. Howe Institute noted that injecting that much extra money into an economy while unemployment is low results in inflation. Article content David Andolfatto, chair of the department of economics at the University of Miami and an international fellow at the C.D. Howe Institute, said inflation should be expected when governments add that much extra demand to the economy. 'Of course prices went up,' he said. 'There's no such thing as a free lunch. Somebody will have to pay.' Article content And not only do consumers pay higher prices but they must then pay again with the higher interest rates the central bank then implemented to try bringing those prices back down. In 2020, interest rates were down to 0.25 per cent as the Bank of Canada aimed to cushion the blow from the pandemic; by 2023, the rate had risen 20-fold, to five per cent. Article content Jean-Francois Perrault, chief economist at the Bank of Nova Scotia, estimated in a November 2023 report that government spending and pandemic-era transfers to Canadians were responsible for about 42 per cent (200 of the 475 basis points) of the increase in the Bank of Canada's prime interest rate during that period. About one-third of those interest rate hikes can be traced back to provincial governments, he calculated. Article content Since the start of 2023, inflation has remained at less than four per cent, just over the Bank of Canada's preferred band of between one and three per cent, but a big decrease from the peak of pandemic-era inflation. Article content And, at least for now, it's largely under control. Statistics Canada reported last week that Canada's inflation rate accelerated to 1.9 per cent in June, up from 1.7 per cent the previous month. Article content Why have some prices kept rising since the pandemic? Article content The Russian invasion of Ukraine, for example, still hasn't been resolved. Many of the people who started working from home during the pandemic still do so, either part-time or full-time, which puts a little more money in most of their pockets. The glut of baby boomers is also at the stage of life where many are retiring, having saved up their money, and now want to spend it. Article content Article content Katherine Judge, senior economist at CIBC Capital Markets said consumer markets are also still getting a boost from pent-up demand and extra savings that consumers accumulated during the pandemic. Article content Wages, meanwhile, have actually been growing faster than inflation since mid-2024, so household purchasing power has also increased. Article content In recent months, the tariff wars launched by U.S. President Donald Trump have started to put upward pressure on inflation in both components and finished goods and will continue to do so unless they are resolved. Article content Economists say that prices don't normally drop — or even approach inflation of less than one per cent — unless demand falls because the economy is in a recession or governments adopt severe cost-cutting measures. Article content Neither has happened since the pandemic. The federal government kept running large deficits in spending. And while it has spoken recently about cutting costs in the bureaucracy, it also plans to boost outlays on defence and infrastructure projects.
Miami Herald
03-07-2025
- Business
- Miami Herald
Miamians save less money than other big-city residents. Here's why
Of the U.S.'s 10 largest metropolitan areas, greater Miami residents are among the least able to save their earnings. The average South Floridian spends roughly 77% of their pre-tax income, according to 2023 data from the U.S. Bureau of Labor Statistics, the agency's most up-to-date statistics. Only the residents of greater Houston and Phoenix are, on average, less able to save than their Miami counterparts. It figures. Since the pandemic, out-of-state wealth has flooded into Florida, and particularly greater Miami, whose population of millionaires nearly doubled between 2014 and 2024. That influx of money has driven up local prices, especially for housing. Meanwhile, local workers' wages have lagged, so much so that more than half of Miami households are living paycheck to paycheck. And the money they do have overwhelmingly goes toward housing. Many of those households that have little ability to squirrel away funds are in vulnerable positions when emergencies strike, noted David Andolfatto, chair of the University of Miami's economics department. Ultimately, that limits their ability to save for long-term goals, like paying for college or buying a house, and to respond to crises, like a health emergency, job loss or destructive hurricane. Why so little savings? The average Miami area household spends $71,000 per year, according to the Bureau of Labor Statistics. Roughly 37% of that spending goes toward housing. Across the country's 10 largest metro areas, only New Yorkers spend as much. Roughly six in 10 people living in metro Miami — which includes Miami-Dade, Broward and Palm Beach counties — spend more than 30% of their monthly income on housing. A third spend at least half of their earnings on rent. Miami is now the most rent-burdened metropolitan area in the United States. That's likely a major reason people are so unable to save, said Shari Bower, vice president and regional director at the Federal Reserve Bank of Atlanta, which covers Florida. 'Miami is one of the least affordable places to live in the U.S., both looking at rents and home prices,' she noted. South Florida's economy is heavily reliant on tourism, added Bower, which means a relatively high share of metro-area jobs are in lower-paying service sectors — another local dynamic that makes it harder for residents to set money aside. Then there are the demographic considerations. South Florida has a sizable retired population, many of whom live on fixed incomes and are spending any savings they might have, said Andolfatto, the University of Miami economist. It also has a large immigrant population. Nearly four in 10 people living in greater Miami are foreign born. Many of them likely send a good chunk of their income back to family overseas, said Bower, leaving them less to save. But generally, she said, greater Miami's relatively low saving rate is most 'likely due to the high cost of living.' That extends beyond just housing. Miami's other chart-topping expenditure: transportation. More than a fifth of the average household's budget is dedicated to getting around — the highest share among major U.S. metro areas, tied only with Houston. Other major expenses as percentages of average household spending include food (12%) and healthcare (6%). And recent proposed cuts to federal spending, including on food stamps, Medicaid and housing subsidies, could further diminish households' abilities to save. 'I sometimes think people are what we call penny-wise, pound foolish,' quipped Andolfatto, noting that a lack of financial cushion doesn't just affect individuals. When people are unable to build even modest savings, they're left more exposed to financial shocks, like unemployment or medical emergencies or hurricanes. And when those shocks hit, the costs can spill over onto the broader public — think, the burdens placed on hospital or criminal justice systems when they process homeless people. Or, noted Andolfatto, the security costs that accompany rising crime, when individuals are in desperate situations and do what they need to do to survive. 'Society is going to pay the price, one way or another,' he said. This story was produced with financial support from supporters including The Green Family Foundation Trust and Ken O'Keefe, in partnership with Journalism Funding Partners. The Miami Herald maintains full editorial control of this work.
