Is your cost of living a little more now than it was weeks and months ago? It’s not because you’re buying more products, it’s because certain goods are becoming more expensive.
In May 2021, the Consumer Price Index for U.S. goods increased by more than 5 percent from a year earlier. It’s a sharp increase — and it’s also the most significant increase in more than a decade since the great recession. And while the inflated price of goods and services is likely reflective of the economy surging back to life after being decimated 18 months earlier because of the COVID-19 pandemic, it’s still certainly enough to make many consumers a bit uneasy. In this post, we’ll take a closer look at what inflation is, what products are increasing in price right now and what it could mean moving forward. Here’s a look:
Inflation Explained: What You Need to Know
Is inflation good? Is inflation bad? It really depends on how healthy inflation is and whether it’s kept in check. If it is, it’s not necessarily a bad thing and is more evident of a healthy economy than anything else. If it isn’t, that’s not ideal.
You’ve likely seen memes or stories on the price of gas, cost of a hamburger, even the price of a home 30 years ago versus what it is today. For instance, the cost of a movie ticket in 1985 was about $3.50. Today, you’re lucky to find a movie ticket for less than $12. Goods that are rising in cost include beer and wine, cars, hygiene products, lumber, appliances and homes, among others.
So what causes inflation? Usually, it’s increased demand for certain goods and services. It’s why inflation today isn’t necessarily a bad thing. It’s more indicative that people are ready to spend money and buy products again after 18 months of overly cautious behavior from the COVID-19 pandemic. When there’s an increase in demand for certain products, there’s obviously going to be challenges in supply chains and manufacturing that might make it more expensive to produce.
So What’s the Deal with the 5 Percent Increase in May?
Like we said earlier, it’s not necessarily all bad news. It’s a sign that people are ready to spend money again. However, that isn’t to say that there aren’t some challenges with managing the inflation rate — and one of the biggest challenges right now is the challenge of getting people back to work. It seems that everyone is hiring right now, and it’s part of the reason why some goods are more expensive. There aren’t enough workers to adequately produce them. The good news is that the Federal Reserve expects the situation to ease in the months ahead as enhanced unemployment benefits begin to expire and more people get back into the workforce.
