Consumer Products

The Price of This Household Item Went Up 52% Last Month

The federal government has several ways to measure inflation. The best known is the consumer price index released by the Bureau of Labor Statistics each month. Last month, that figure soared 7.9% year over year, which was the largest increase in four decades. Another carefully followed set of data is the producer price index, released by the same agency. It shows what businesses pay for goods and services. This is often passed on to consumers later. The producer price index surged 10% last month, a sign of more financial pain ahead for Americans.

Most of the items in each index are well known by the public. Some of the increases are highly visible. Gasoline prices have hit an all-time high. The producer price index showed an increase of 60.6% in February. Newspaper headlines often scream about the increase in food prices. The Russian invasion of Ukraine will cut off a portion of the world’s wheat supply. Grain prices rose 20% last month.

The price spikes raise several policy questions. The first is the pace at which the Federal Reserve raises rates to moderate the increase in prices. The Fed just increased rates by a quarter of a percentage point, with six more hikes expected this year. However, as inflation accelerates, there will be a debate about whether these rates should be raised more often or by larger steps, perhaps as high as 0.5% at any given time.

Some experts believe the inflation increase is behind us. Paul Ashworth, chief U.S. economist for Capital Economics told The Wall Street Journal he believes that oil prices will soon decline and supply constraints ease and therefore “March should be the peak.” One of America’s most prominent economists and a former Treasury Secretary disagrees. Larry Summers believes that inflation will be troubling enough to cause a recession.

There is little reason to believe oil prices will drop, given current geopolitical conditions that have triggered bans on the purchase of Russian crude. Car prices almost certainly will not moderate. Supply chain problems that have added to the cost of several items do not appear poised to be resolved soon. And the prices of certain meats and grains have risen for over a year, implying longer-term issues. The February numbers may not be the worst this year.

The largest increase among household items in the producer price index was turkey, the price of which jumped 52.3%.

Click here to see the household item with a plunging price.

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