During the past few months, there has been a lot of talk about inflation. Inflation means that the price of goods and services is going up. This means that people need to spend more money to purchase the same products. At the same time, what does this mean for you, the average consumer?
What Is the Current Inflation Rate?
According to information that has been published by the Bureau of Labor Statistics (BLS), the price of typical goods and services has gone up 5.4 percent during the past 12 months. This means that even if your work gave you a raise of three percent, your buying power has actually gone down. This means that you cannot purchase as much as you did despite getting a raise.
Why Is Inflation Happening Now?
There are several reasons why inflation is happening now. These include:
- There is more demand for certain products and services, meaning that prices are going up.
- Recently, the Federal Government passed a massive stimulus package, pumping more money into the economy. This means more people have money to purchase things, increasing demand.
- The Federal Reserve has kept interest rates low, which pumps more money into the economy, increasing demand.
- Supply chains are still impacted by the pandemic, further increasing demand for products and services because there is reduced inventory.
What are a few examples of major price changes that have taken place in the last 12 months?
Examples of Price Changes: Year Over Year
So, what do all of these price changes mean for you? It is helpful to take a look at a few examples, including:
- The average price of a gallon of gas today is $3.27, which is up approximately 45 percent from one year ago.
- The average price of a used car today is $27,807, which is up approximately 27.6 percent from one year ago.
- The average price of a gallon of milk today is $3.63, which is up approximately 10 percent from one year ago.
- The average price of a home today is $359,000, which is up approximately 13.2 percent from one year ago.
These are just a few examples of the way prices have changed during the past 12 months. What types of impacts can you expect in the future?
The Impact of Inflation on You and Your Family
Even though inflation has been relatively consistent during the past 100 years, there has been a spike in the past 12 months. Inflation erodes purchasing power, makes it harder for families to pay their bills, and impacts the ability of families to take out loans.