High Inflation Rates Mean Prices On the Rise
While some prices are dropping, others across the United States are still on the rise due to high inflation rates. No need to sound the alarm, however. Greater Niagara FCU can provide clarity on causes of inflation, how it affects the everyday consumer, how to best prepare and manage times of high inflation, and more, with this post, Understanding the In’s & Out’s of Inflation.
What Is Inflation?
Inflation is defined as the rate at which prices for goods and services rise. Inflation is used to measure the overall impact of price changes for a group of products and services. Thus, as prices start to rise, consumers find themselves being able to buy fewer and fewer goods with a singular unit of money. For example, last year a consumer might have been able to take a $20 bill to the grocery store and pick up five items that they needed. However, due to inflation that same consumer can go to that same store with $20 the next year but only be able to pick up three of the same five items they got last year.
What Causes Inflation?
According to ycharts.com, America’s inflation rate was at 8.20%, as of September 2022—higher than both the rate this time last year (5.39%) as well as the long-term average rate of 3.27%.
So, what exactly causes an economy’s statistics to ebb and flow like this? There are several factors that contribute to how the rate of inflation changes, and when, such as:
- The pent up demand for goods and services.
- Supply chain disruptions that cause a reduction in inventory.
- Rising energy and commodity prices.
- A lower dollar exchange rate which increases import prices.
- Rising housing and medical care costs.
Where Can Consumers Expect to See Inflation?
Unfortunately inflation is pretty much impossible to control. When it’s on the rise, evidence of inflation can become more apparent in one’s everyday life—beginning at the gas pump.
According to a June 2022, CNBC article, the average cost of gas has gone up a shocking 48.7% since 2021. That same article also notes how grocery prices have climbed 11.9% since last year, with meat, poultry, eggs, and fish being the most affected by inflation rates and supply chain strains. With those primary indicators feeling its effects, inflation can also rear its presence if you’re looking at…
- Buying a new or used vehicle.
- Electricity prices.
- The housing market.
- Dining and entertainment.
- Shopping for new clothes.
How Can Consumers Stay Financially Prepared?
Findings from a Bankrate survey reported that more than 40% of US adults stated that money concerns have a negative impact on their mental health. So, how can you avoid the approaching headache inflation can cause?
One of the best ways to fight inflation is by reevaluating your monthly budget since you may need to cut unneeded expenses to make room for needed ones. Some examples of unneeded expenses to reevaluate include entertainment costs, unnecessary travel, or dining out.
Another way you can avoid paying higher prices is by waiting to buy. For example, if you don’t absolutely need a new car, buying one right now is probably not in your best interest. Avoid buyer’s regret by waiting to purchase your vehicle until prices go back down to normal.
As a consumer, fighting Inflation can be quite difficult since rising prices tend to attack our higher demand items. Having the conversation is a great place to start when it comes to easing money-inducing anxiety. Remember to focus your energy on the things you can control by monitoring your spending and understanding what’s happening around you.