If you’ve filled up a gas tank, or been shopping lately, you know prices are up. And it looks like inflation will be around a while.
On Wednesday, the government said the best-known indicator of inflation, the Consumer Price Index, had soared 6.2% from a year ago — the biggest 12-month jump since 1990.
“High inflation means that you can buy fewer goods and services with your dollar,” University of Maryland economics professor John Shea told WTOP Friday morning. “That especially affects people on fixed incomes, or people whose savings is mostly tied up in cash or in bank accounts, where they’re not benefiting from the increases in the stock market.”
Shea said Social Security recipients are going to get a 6% COLA increase in January, but for now they’re having to face the increase in costs without that benefit.
Consumers can take small steps to try to minimize the effects of inflation.
“Gas prices are up 50% in the last year, so you might want to cut back on your driving, or stay closer to home,” Shea said.
“Grocery prices are higher — about 5% — but it’s higher in some categories than others,” he said. “Beef prices are up 20% in the last year, pork is up 14%, but chicken and seafood haven’t gone up as much, so substituting the cheaper kinds of meats will help you avoid some of the consequences.”
It’s a good news/bad news situation for people with jobs: “If you’re a worker, your wages have gone up by 5%, on average, over the last year, so that can shield you from some of the consequences of higher prices.”
But it comes with a downside: “Wage increase will drive up inflation, because labor is the most important cost component for all businesses,” he said.
With many workers dropping out of the labor force, labor shortages result in businesses having to pay employees more, and those costs are passed along to consumers.
“We’ve seen a shift in demand from services toward goods, and that’s created a bottleneck, because we have limited capacity to produce goods and ship goods. So we’re seeing shortages in things like semiconductors, which is driving new and used car prices up,” said Shea.
Meanwhile, the pandemic stretches on: “If we can’t get people feeling more comfortable going back to the movies, to restaurants, and bars, then this inflation is likely to continue,” Shea said. “It’s going to be more than just a few months.”