DAYTON, Ohio (WDTN) — Inflation has increased by a record amount in the past year, but what does this mean for the everyday person?
In the simplest terms, inflation measures how fast our cost of living increases. Specifically, inflation rate is the percentage increase in consumer price index (CPI), according to Mingming Pan, associate professor of economics at Wright State University.
Inflation is caused by a variety of factors including supply and shipping issues and shortages — problems which have intensified due to the pandemic.
“The delta variant swept through the under-vaccinated Asian countries such as Vietnam, Thailand, Indonesia, etc.,” Pan said. “Their factories were shut down or drastically reduced on-floor workers. COVID-19 did not spare global shipping either, with some ports locked down or others understaffed. As a result, in the United States, manufacturers face missing components or rising cost of raw materials.”
The price of meat, poultry, fish and eggs rose 5.9% from July 2020 to July 2021, according to the Department of Labor. The White House even acknowledged rising prices at grocery stores, with U.S. Department of Agriculture Secretary Tom Vilsack blaming it on a lack of competition in the supply chain.
“Consumers’ increased demand coupled with producers’ reduced supply has translated into the rising prices that we are facing currently,” Pan said.
The U.S. Bureau of Labor Statistics releases the CPI monthly. In August, it increased by 0.3 percent. According to Pan, this is good news.
“Looking at where we have come from, the 0.3% inflation in August is actually good news, which shows that the pace of the price increase in this year has finally slowed down,” Pan said.
She also said the inflation for food items is not as bad as it was in the 2nd quarter of 2020, when food prices rose 1.5% in April and 0.7% in May.
Ultimately, Pan says inflation means that you have to pay more for what you buy. If your salary rises at the same rate as inflation, there’s not much cause for concern. However, it’s when salary does not increase that it causes problems.
“When our salary increase cannot catch up with the price increase, we will not be able to afford as much as before. Planning and prioritizing purchases becomes important,” Pan said.
The U.S. Federal Trade Commission recommends people make a budget to see where you spend your money and save it. This will help you plan to make sure you will have enough money every month.
The commission has a link to a monthly budget tool to help people manage their finances. To view the sheet, click here.