For more than three years, readings from the U.S. consumer price index, or CPI, have been well above the Federal Reserve’s long-term inflation target of 2%. Americans have likely noticed prices surging for goods and services ranging from groceries to insurance to housing to transportation. Unfortunately, inflation has hit certain industries and commodities harder than others.
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The U.S. Labor Department breaks down the monthly CPI reading into several subcategories. Here’s a look at the five subcategories that have averaged the highest annual inflation rates over the past three years and some public companies that have been impacted by rising prices.
Food Away From Home
Average three-year inflation rate: 6.4%
One of the most common complaints Americans have about inflation is rising grocery prices. But while the grocery bill has been shocking on a weekly basis for the past three years, prices for food away from home have risen even more. This subcategory of the CPI takes into account restaurant prices, which have skyrocketed since the pandemic ended.
At McDonald’s Corp. (ticker: MCD) alone, the price of a McChicken sandwich has risen from $1 in 2014 to $2.99 in 2024. The price of medium fries was $1.59 in 2014, but now it’s $3.79.
But as much as McDonald’s and other fast food restaurants have raised their prices, they are navigating inflation relatively well compared to their higher-priced casual dining competitors. For example, the share prices of Red Robin Gourmet Burgers Inc. (RRGB) and Cracker Barrel Old Country Store Inc. (CBRL) are each down more than 50% in the past three years. Even Starbucks Corp. (SBUX) stock is down more than 20% in that period.
Many restaurant customers are choosing lower-priced fast food instead. McDonald’s stock is up about 25% in the past three years. Shares of KFC, Pizza Hut and Taco Bell parent company Yum Brands Inc. (YUM) are up 20% in that stretch. Domino’s Pizza Inc. (DPZ) is up 23%.
And of course, many Americans are simply ditching restaurants and cooking at home. It’s not surprising that Walmart Inc. (WMT) shares are up 30%, Kroger Co. (KR) shares are up 51% and Costco Wholesale Corp. (COST) shares are up 97% in the past three years.
New Vehicles
Average three-year inflation rate: 6.4%
Another place inflation is hitting consumers particularly hard is in car and truck prices. Kelly Blue Book recently reported the average transaction price (ATP) for new cars in March 2024 was $47,218, up 15.5% since March 2021. Even in the non-luxury category, the ATP for new vehicles has climbed to a painful $44,083. If you want to go electric, it’s even worse. The ATP of a new electric vehicle is $54,021.
To make matters worse, auto insurance premiums are skyrocketing as well. The average annual premium of full coverage auto insurance in 2024 is $2,543, up 26% from a year ago.
These sky-high vehicle prices may be one reason vehicle sales remain well below peak 2021 levels. Instead of buying new vehicles, Americans are just keeping their old cars and trucks longer. The average age of vehicles on the road in the U.S. hit a record 12.5 years in 2023.
How are these trends playing out in the market? In the past three years, shares of auto parts suppliers Aptiv PLC (APTV) and Magna International Inc. (MGA) have tanked. The share price of auto sales platform Carvana Co. (CVNA) has fallen as well. Meanwhile, the stock prices of aftermarket parts suppliers are soaring as Americans are forced to repair their aging cars. In the past three years, shares of AutoZone Inc. (AZO) and O’Reilly Automotive Inc. (ORLY) have each roughly doubled.
Electricity
Average three-year inflation rate: 7.7%
One area where every American feels inflation pressure is on their monthly electricity bill. The retail price for electricity in the U.S. averaged $12.72 per kilowatt hour in 2023, up from $10.59 in 2020. The average household electric bill in the U.S. as of April 2024 is $138.90. Electricity prices are even worse in certain states. Hawaii, Connecticut and Rhode Island have the highest monthly electricity bills of any states, as of January 2024.
Rising electricity prices are bad news for American consumers and businesses, but they are no problem for regulated electric utility companies. Utility sector stocks are known more for their dividends than their volatility, but many have generated total returns that have outpaced the S&P 500 as electricity prices have risen in the past three years. PG&E Corp. (PCG) has a gain of 58%, Exelon Corp. (EXC) has a gain of 30% and Southern Co. (SO) has a total return of 28% in that time.
[SEE: 7 Stocks That Are Good Inflation Investments]
Natural Gas
Average three-year inflation rate: 10.7%
One of the reasons electricity prices have risen sharply in recent years, particularly in 2021 and 2022, has been natural gas. Fossil fuels accounted for 60% of U.S. electricity production in 2023, according to the U.S. Energy Information Administration. Natural gas alone was used to produce 43.1% of total U.S. electricity.
From late 2020 to mid-2022, U.S. natural gas prices trended steadily higher, occasionally spiking along the way. The Henry Hub natural gas spot price was just $1.63 per million British thermal unit (Btu) in June 2020. By August 2022, that price had reached $8.81 per million Btu. Natural gas prices have since normalized and are back down below $2 per million Btu, but soaring gas prices were a major contributor to the spike in inflation in 2021 and 2022.
Shares of natural gas stock Range Resources Corp. (RRC) are up 260% in the past three years. Antero Resources Corp. (AR) is up 232%, while Devon Energy Corp. (DVN) is up 119% in that time.
Gasoline
Average three-year inflation rate: 19.6%
As if rising car prices and rising auto insurance prices were not bad enough, the single highest inflation rate of any CPI category in the past three years has been gasoline. U.S. gasoline prices hit a record $3.95 per gallon in 2022 before pulling back to a still pricey $3.52 in 2023. So far in 2024, national retail gasoline prices have once again crept back up above $3.60 per gallon. Gasoline prices are highest in Washington ($4.55), Hawaii ($4.69) and California ($5.15).
Higher gasoline prices benefit certain industries within the energy sector more than others. The petroleum refiners that turn crude oil into gasoline and other petrochemicals have opportunities to maximize their profits when gasoline prices rise. In the past three years, PBF Energy Inc. (PBF) shares are up 304%, Valero Energy Corp. (VLO) shares are up 124% and CVR Energy Inc. (CVI) shares are up 54%.
In addition, the gas stations and travel centers that sell the gasoline to drivers are making a killing on higher gasoline prices. Over the past three years, Marathon Petroleum Corp. (MPC) shares are up 258%, Murphy USA Inc. (MUSA) shares are up 196% and Sunoco LP (SUN) shares are up 64%.
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5 Areas Where Inflation Is Highest originally appeared on usnews.com
