In One Chart

Inflation is following an ‘eerily similar’ path as the one taken in 1966-1982

Last Updated: Oct. 20, 2023 at 4:00 p.m. ET
First Published: Oct. 20, 2023 at 2:27 p.m. ET
By Vivien Lou Chen

Inflation has been full of surprises throughout its three-year climb in the U.S., yet one thing that apparently hasn’t changed is its overall path when compared with what it did between 1966 and 1982.

A chart of the year-over-year change in the consumer price index shows headline inflation is basically taking an “eerily similar” track as the one it took more than four decades ago, according to Alejandra Grindal, chief economist, and London Stockton, research analyst, at Sarasota, Fla.-based Ned Davis Research.

The absolute levels of the CPI year-on-year changes look much different between the two periods — with inflation going well above 10% in the 1970s and 1980s, but only peaking this time around at 9.1% last June. In both periods, however, inflation subsequently fell off and was followed by trouble out of the Middle East. An Arab oil embargo in the 1970s imposed on the U.S. and a handful of other countries gave way to a second round of inflation later that decade and into the early 1980s. This time around, Iran’s foreign minister has called for Islamic countries to boycott Israel, including stopping oil shipments.

https://images.mktw.net/im-872680?width=700&size=1.2549019607843137

SOURCE: BUREAU OF LABOR STATISTICS, NED DAVIS RESEARCH.

In a note on Friday, Grindal and Stockton said that while they don’t expect inflation to retest its 2022 highs, “that doesn’t mean inflation is headed for a clear path downward, as there are both near-term and long-term risks.”

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