Concerns about inflation have increased in recent months, as stimulus payments from the federal government increased the ability of consumers to spend more than they had since well before the COVID-19-driven recession. This was compounded by difficulties low-paying industries had attracting workers, which made them raise the wages of hundreds of thousands of workers.
But just as the pandemic caused prices of some items to soar, it caused prices of other items to plunge. The price of “food at employee sites and schools” fell the most, most likely because many people are now working from home and schools are not at full capacity yet. On the flip side, the price of this household item is soaring.
Consumer spending is not the only reason inflation fear has been rekindled for the first time since before The Great Recession. Fuel prices have risen over the course of the year, with a sharp increase in the price of oil. Housing prices have risen at an unprecedented pace, to some extent because of low mortgage rates.
Can the government use traditional measures to keep down the prices of many items that make up the consumer price index, even after their recent increase? The Federal Reserve has set interest rates relatively low since the Great Recession to help stimulate the economy. But with the recent COVID-19 recession and inflation creeping up, the Fed may be running out of ways to influence rising prices. If the Fed raises rates to combat inflation, for example, it could put a damper on the already pandemic-stricken economy.
Once a month, the Bureau of Labor Statistics provides the consumer price index, the most carefully followed set of data about monthly prices movement. The numbers are broken into dozens of individual categories. The most recent release was for August. Figures are compared to the immediately previous month and to the same month a year ago.
In August, the CPI for Urban Consumers rose by 5.3% from the same month last year. The price of some items rose by double digits. Among them “beef and veal” rose 12.2%, fuel oil rose 28.6%, women’s clothing jumped 11.9%, and used car prices rose 31.9%. The price of education has also been increasing, and not just during the pandemic. This is the cost of college the year you were born.
Even as inflation has become a part of the economic landscape this year, the prices of some items fell in August, and several fell very sharply. A review of the list indicates that price decreases have been partially due to the pandemic.
Food at employee sites and schools fell 42.5%. This may be due to a drop in students’ attendance because of the virus and summer vacation. Food prices at employee sites were likely affected because of the working-from-home mandate in most companies. The price of telephone hardware and calculators, both often used in offices, dropped 15%. The price of sewing machines and fabric fell 10.8%.
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