The price at the pump and in stores is higher these days. The Consumer Price Index, from the end of 2021, shows inflation rose 7% from December 2020 to December 2021, according to the U.S. Bureau of Labor Statistics.
“The two most important numbers are the headline number and that came in at 7% for the year 2021, the highest number since the early 80s. And the core inflation, the piece excluding food and energy, came at about 5.5%,” Nikolai Roussanov, a finance professor at the Wharton School of the University of Pennsylvania, said.
In the same year, Americans saw a 49.6% price increase in gas and a 12.5% increase in meats, poultry, fish, and eggs, according to the U.S. Bureau of Labor Statistics.
Economists say pandemic stimulus money contributed to some of the inflation, but is only partly to blame.
“When you have this tremendous amount of money coming into the economy, it stimulates aggregate demand. So that’s half of the story here. At the same time, the pandemic completely disrupted this incredibly complex and finely tuned machine we call the supply chain,” Connel Fullenkamp, an economics professor at Duke University, said.
Fullenkamp said inflation has been focused on goods rather than services.
“We have seen wages go up in the past year, but inflation has gone up so much it has eaten up all of those gains,” he said.
“Nobody wants to raise prices, so when you see food prices coming up in the supermarket, it is almost surely some function of rising input costs which are being passed on to consumers as minimally as possible,” Ricky Volpe, an associate professor in the Cal Poly San Luis Obispo Agribusiness department, said.
Volpe, who used to conduct food price research for the USDA, said it’s also important to look at the context of the numbers.
“Retail food prices today still remain lower in real terms than where they were a generation or two ago. Food prices have not skyrocketed relative to the U.S. dollar,” Volpe explained. “A lot of the major price increases that we’ve seen in the supermarkets pertain to more value added processed, ready-to-eat foods.”
People may want to consider what food prices are being compared to.
“Gas prices plummeted early in the pandemic. So for that reason, we should caveat some of the gas price inflation numbers saying that prices fell artificially at the start of the pandemic because of low demand,” Patrick De Haan, the head of petroleum analysis at gas price app GasBuddy, said. “We’ve never seen gas prices plummet so far and then jump so much in the course of a year and a half or so. But of course we’ve never lived through a pandemic and that's what's driving these price differences.”
Americans can expect to spend more of their money as demand and supply level out. Experts say it could take a while, depending on the commodity.
“I see it as lasting until the end of this year before things really start to get back to normal and those shipping costs and supply chain issues start to get really resolved. That's going to keep inflation higher than normal,” Fullenkamp said.
“The spring could be a very busy time, prices could surge, but then we do see some relief towards the end of the year as things slowly normalize back to where we were pre-pandemic in terms of oil production,” De Haan said.