Rising costs have significantly impacted Americans in the last year. Prices of food, transportation and more have soared, bringing with them a cost-of-living crisis.
The good news is, inflation rates are slowing. According to data from the U.S. Bureau of Labor Statistics, inflation rose by 0.1% in March, which was half the expected hike.
Still, as costs rise and wages struggle to keep up, many Americans wonder about the source of these hikes and how individuals can budget accordingly.
Transportation costs have a marked impact on the rate of inflation because everyone experiences them and they trickle down to affect other categories.
Read on to learn more about rising transportation costs, how they affect inflation and what you can do to manage these costs.
[Read: How to Make a Budget — and Stick to It.]
Rising Costs of Transportation by the Numbers
There are numerous different costs you can attribute to transportation, and according to the U.S. Bureau of Labor Statistics Consumer Price Index, many of these have been trending upward the last year.
For instance, transportation services are up 13.9% in the last 12 months (as of March 2023) and new vehicle costs are up 6.1%.
It’s not all bad news, however. The cost of used cars and trucks is down 11.2% and all types of gasoline prices are down 17.4%.
Much of this can be attributed to the pandemic, Michael Collins, chartered financial analyst at Endicott College in Beverly, Massachusetts, says.
“The increased demand for cars created a supply shortage, resulting in higher than normal inflation. Additionally, the disruption in global shipping networks caused by the pandemic has led to higher shipping costs for new vehicles, as well as parts and other materials needed for manufacturing. This has caused new car prices to skyrocket in the past year,” he says.
How Transportation Costs Impact Inflation as a Whole
When transportation costs are high, the rate of inflation climbs with it.
“The rise in transportation costs is an important factor in the current period of inflation. High transportation costs reduce the amount of money consumers have available to spend elsewhere, resulting in lower demand for other goods and services. This further drives inflation and contributes to the rising cost of living that we are seeing globally,” Collins says.
And transportation costs directly impact shipping for other major industries — potentially driving up their prices as well.
“Transportation and shipping costs are known to have significant and long-lasting effects on inflation rates worldwide. When items cost more to ship, it raises prices all the way down the line and eventually ends with the consumer. Even once shipping costs go down, it’s typical for inflation to endure sometimes for longer than a year. So, rising shipping costs that began during the pandemic are likely to be affecting inflation rates now,” Carter Seuthe, chief executive officer of Credit Summit, says.
That means that even as inflation rates slow, high transportation costs can continue to affect the price of other goods and services.
[READ: Consumer Sentiment Ticks Up in April]
How Will Rising Transportation Costs Affect Me?
Not only do rising transportation costs have an impact on inflation as a whole, individual consumers will likely struggle not to feel the impact in their daily lives.
“The real issue with transportation costs is that they’re simply baked in for so many people. Sure, you can skip a vacation but you can’t cut back on going to work, no matter how expensive gasoline prices or car repairs get,” Ann Martin, director of operations at CreditDonkey, says.
She adds that many will try to cut back on other expenses — even food — before sacrificing going to work.
“In other words, high gas prices all by themselves represent a serious economic hardship for many ordinary Americans, and when combined with high inflation other goods, it’s downright devastating,” Martin says.
[Related:10 Gas Apps to Save You Money as Gas Prices Rise]
Tips for Dealing with Rising Transportation Costs
If the rising cost of transportation costs are affecting you, consider how you can adjust your budget to combat it. Consider cutting back on discretionary spending or even taking on a side gig to bring in extra income.
If you’re in the market for a new car, keep in mind their prices continue to rise in inflation, while used car prices are finally seeing a downward trend. Airfare is also getting more expensive, so if you can save by driving to your destination, consider that as well.
Even small changes can make an impact on your budget and free up money for other expenses.
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How Transportation Costs Impact Inflation originally appeared on usnews.com
