The Steady Rise of Inflation – What Exactly Does This Mean?

Inflation is a serious concern around the world. Most countries are experiencing inflation, and the United States officially hit a 40-year high. Explore what this means for consumers and businesses. 

 

Inflation Is at Its 40-year High in the United States

 

Back in December, the World Economic Forum reported that inflation in the United States was almost at a 40-year high. By March, the country had officially reached that 40-year high. But in addition to reaching a new high, inflation also seems to be on the rise. 

 

The CPI

 

As of February 2022, the U.S. consumer price index (CPI) was 7.9%. This represented a month-over-month increase of 0.8%. 

 

February also saw a month-over-month increase in food costs of 1%. This was 3.5% for energy. Without food and energy accounted for, the month-over-month core inflation was 0.5%. The year-over-year figure was 3.5%. 

 

Some other relevant (month-over-month) increases include: 

• Housing and shelter by 0.5%
• Recreation by 0.7%
• Clothing by 0.7%
• “Other goods and services” by 1.1%
• Medical care by 0.2%

 

Interestingly, new vehicle prices increased 0.3%, while used vehicle prices dropped 0.2%. 

 

The Causes of the Inflation

 

Many of the causes of the current inflationary period are well-known. There have been supply constraints due to the pandemic. These are combined with strong demand. 

 

Corporate Pricing Power

 

Another significant factor is corporate pricing power. This becomes clear in the National Federation of Independent Businesses’ report on companies that can raise prices. They found that net 68% increased prices in February. The proportion of companies that plan to raise them in the next three months is close to the record as well. 

 

Predictions

 

Experts predict that inflation will approach 9% or even reach it. They cite the higher costs of labor and materials as one of the main contributing factors. 

 

Conclusion

 

Inflation in the United States is on the rise, and experts predict it will continue to climb. Experts predict the February figure of 7.9% will lead to even higher prices for goods.