By Leonard A. Robinson
Shoppers across the country are beginning to notice a sharp climb in prices everywhere from grocery stores to furniture shops and even used car dealerships.
Every component of the consumer price index (CPI) climbed during April, according to the Bureau of Labor Statistics. The index measures consumer prices for a wide array of goods, including clothing, groceries, recreational activities, dining out, and automobiles.
Prices have increased by 4.2% overall from April 2020. The jump was roughly 4% higher than predicted by economists and the largest jump since September 2008, or the height of the Great Recession, CNN Business reported.
The biggest jump was in the cost of used automobiles – which climbed nearly 10% – after a grueling past year as workers sold their cars due to working primarily from home. Rental rates for cars and trucks have also soared by roughly 80%. Another contributing factor has been a global chip shortage which has severely limited the production of newer vehicles.
The average price for a used car exceeded $25,000 for the first time in the history of J.D. Power research’s tracking in April, reported the Wall Street Journal.
Some experts do not expect this to be a long-term trend for the auto industry.
“People need to get back to work, but reluctance to use public transportation has driven up demand for used cars, and prices have surged,” Pantheon Macroeconomics chief economist Ian Shepherdson said. “This won’t go on forever.”
Food prices have also climbed sharply, both at the check-out line and on the restaurant menu. Today, food prices are 2.4% higher than they were a year ago, with restaurant prices rising 3.8%. Adjusted for two years ago, food prices have climbed a milder 2.2%.
Businesses, many of whom have raised prices, also face a hurdle in hiring as many say they have more openings available than applicants. Some have floated that raising wages will address this issue but will inevitably lead to costs passed along to consumers.
“The worker shortage will go away because wages will rise,” Cato Institute economic studies director Jeffrey Miron said earlier. “And then consumer prices will follow.”
Another contributing factor to rising costs is numerous supply chain hurdles, such as the Colonial pipeline hack on May 8 or the Suez Canal blockage in March.
On May 12, the Wall Street Journal reported gas prices have climbed past the $3 per gallon mark for the first time in over six years as Americans in the Southeast and lower Mid-Atlantic panic purchase gallons of gas.
Three-quarters of all gas stations in Raleigh and 71% of all gas stations were out of fuel in Charlotte, reported the Journal. 60% of gas stations in Atlanta and Norfolk also experienced a gas shortage.
The Federal Reserve decided against raising near-zero interest rates and has anticipated price increases for the summer months as the economy recovers. It signaled that the longer prices continue to climb, the closer the Fed will monitor to see if rates need to be raised earlier.
Conventional economics wisdom paints a risky picture for inflation climbing for such long periods. For starters, there is a fear that consumers will panic about their money- including funds gained from generous unemployment packages and coronavirus spending – and spend less. Meanwhile, investors worry that high inflation will force the Fed to raise interest rates or cut back on its billion-dollar asset purchases, both bad results for the stock market.
There are some practical tips to avoid the worst woes of rising inflation.
Americans should have an honest look at their budgets, prioritize their true needs, not try to maintain status symbols, and look for overall ways to “take it down a notch,” said American Compass executive director Oren Cass- who published a report last year critiquing traditional inflationary measures – at an event for Consumers’ Research in February.
