As we all have witnessed, inflation has made a big come up in recent months, making many people’s lives harder and various products more expensive. Taking a drive is pricey and almost every product we spend money on has taken a climb. Within our industry, we’ve seen paper and distributions prices skyrocket. It’s difficult to see where things are headed, especially when there are so many factors involved in these economic changes and various predictions and opinions of what could happen next. Here is what we know right now. The current outlook and statistics provided may give us some insight as to how to spend a little more thoughtful and of course, remain calm in a time of economic distress. What goes up must come down eventually, right?
What Has Changed?
Practically everything is more expensive than a year ago. Buying groceries may look different now for many people and the thought of buying a new car or sending your kid away to college just may not be in the budget. The energy and gas increases look a lot like they did back in 2006 and 2008 which means traveling, whether its by plane or car, is just all around more expensive.
As of May 2022, the U.S. Bureau of Labor Statistics showed that the average percentage raise of all consumer items hit 8.6% (from the previous year). Food costs specifically are up 10% and energy prices are up a total of 34%.
Specific areas of price increases (May 2021-May 2022) the Bureau of Labor Statistics has noted include:
- At home, + 11.9%
- Away from home, + 7.4%
- Energy, + 34.6%
- Gasoline, + 48.7%
- Natural gas, + 30.2%
- New vehicles, + 12.6%
- Used vehicles, + 16.1%
- Airfare,+ 37.8%
- Shelter prices, + 5.5%
- Household furnishings, + 8.9%
The Main Drivers of Inflation:
These disparities we are now facing are directly related to supply and demand challenges from COVID-19 and an influx in energy and food costs. The federal Reserve noted that amidst the pandemic’s effect on our supply and demand chain, Russia’s war on Ukraine is also imposing extreme hardship. The war is unhumanitarian on all levels and aside from the terrors been committed, it’s also doing a lot of damage to the economy. Global economic activity is taking great hits from this war. The Federal Reserve mentioned that while production and consumer spending has slowed, the unemployment rate is staying low.
The Big Picture & Various Predictions:
Pew Research mentioned, “U.S. inflation rate has almost quadrupled over the past two years, but in many other countries, it’s risen even faster.”
Israel, Greece, and Italy are among the top three highest inflation rates. In fact, Israel was around 25 times the rate in the first quarter of 2022 than it was in the first quarter of 2020, pre-pandemic. The United States inflation rate is 13th highest out of 44 countries.
The Federal Reserve stated, “The Committee is strongly committed to returning inflation to its 2 percent objective.” The time frame mentioned in their press release for that initiative was “over the long run”, and it’s also a number we haven’t seen in quite some time due to our economic hardships in recent years. As of June 2022, the rate was a 9.1%.
When it comes to the nation’s biggest problems, a conducted Pew Research Survey showed that Americans find inflation, health care, violent crime, and gun violence to be the largest problems.
Since we cannot fully predict the future, here’s what we expect consumers to be doing and you may find that these are good tips for leveraging the disparities that come at you as well.
- Rethinking the grocery list – certain products are more expensive than others and prices change somewhat frequently. Buying in bulk or purchasing products that are more bang for your buck may be one solution to combat waste and high prices.
- Ditching expensive travel – with gas and airfare at astonishingly high prices, finding things to do or trips to take closer to home may not be so bad after all. You may see more people maintaining hobbies from home also instead of spending their disposable income on things outside of it.
- Reestablishing the family’s needs – with higher prices of goods we need to live, it may be time to reevaluate what’s important and leave out the additional trip to the mall or shopping spree. It’s expected that disposable income will have food and gas wrapped around its fingertips for a little while longer.