Consumer Prices Jump 8.5%; Inflation Rising Faster than it has in 40 Years
Everyone has seen the effects of rising inflation. From car lots to grocery stores, the side effects of inflation are on full display for the consumer. March showed no relief for prices, and prices aren’t likely to fall as we head into the Summer either. The good news is that prices may have peaked.
In fact, inflation hit a 40-year high as gasoline prices, food prices, and the cost of living in general crept even higher. With the 8.5% increase in the consumer price index, Americans haven’t had their pockets hurt as much as they are now since the 1980s.
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There are other factors that play a role in the increase in gasoline prices too. Russian oil supplies are reduced due to the invasion of Ukraine, and these supplies affect the entire world’s price on gas.
Worker shortages in the United States are causing employers to up the starting pay of new hires too. This is putting more money in the working class’s pockets, increasing their buying power and driving up demand. Businesses also have to raise the price of their own goods to make up for the increase in pay.
Gas Prices Remain High Despite Crude Oil Prices Falling
Crude oil prices soared to new heights in March 2022. The prices have rebounded significantly since then; however, this isn’t reflected at the pumps just yet. Economists call this rockets and feathers. It means prices are quick to go up, like rockets; when prices go down, they decline like feathers – slow and steady.
Prices will likely remain high throughout the Summer whether or not crude oil prices continue to go down. Americans spend more time on the road during the Summer and will keep demand high for gasoline. It may not be Fall until we begin to see any significant drop in gas prices.
Food Prices Continue to Soar
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Grocery store prices have increased 10% over what they were a year ago, and they have gone up 1.5% over the past month.
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Some of the supply issues in the food industry stim from the invasion of Ukraine too. FOr example, Ukraine accounts for 8% of the world’s wheat exports. The invasion has slowed down shipments and even stopped them all together in some cases. Any item that contains wheat will likely continue to rise. Breakfast cereals have increased 2.4% in the last month, rice, pasta, and cornmeal has gone up 2.8%. Fresh baked goods, like biscuits and muffins, have went up 2.5%.
Financial institutions, such was Wells Fargo and Barclays, believe the worst of the inflation is behind it. They claim inflation has likely peaked in March 2022, and a fading pandemic will help ease up on supply issues. Economists claim that labor shortages will start to come to an end as well.
Sam Bullard, Wells Fargo economist, warns that it will be a painfully slow process to get back to normal pricing.
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The pandemic of the last two-years isn’t the only culprit responsible for rising prices. The war in Ukraine is unpredictable, and the slightest change in the invasion could steer prices in any direction. Despite this, Pooja Sriram, Barclays economist, expects inflation to come to a slow as the year progresses. He predicts 6.4% inflation in June and 4.4% inflation by the end of 2022.
It’s clear that fixing inflation in the United States will take longer than anyone expected.
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