The inflation rate for August, as measured by the consumer price index, rose 8.3%. On the surface, this appeared to be an improvement compared to the 9.1% rate in June and 8.5% in July. However, the number could be misleading. Gas, oil, and fuel oil prices have dropped sharply in recent weeks. Not including these, inflation continued to be near four-decade levels.
Though they are truly the exception, for a very few products and services, prices did drop. And the price of smartphones is plunging.
On the broadest basis, the decline in the price of fuel should not be dismissed. The American family and many businesses were squeezed financially when gasoline prices reached a record $5 per gallon of regular, on average nationwide three months ago. Fortuntanly, the number dropped to $3 per gallon recently. Still, oil prices remained higher in August compared to last year, a period when these prices were unusually low.
Food prices continued to be the most vexing inflation problem for many Americans. For example, the price of butter last month rose by 25%. The price of eggs was up almost 40% year over year in August. (This is where the most people need food stamps in every state.)
Unfortunately, most of the items for which prices fell in August year over year are not essentials. Smartphone prices dropped 20%. Notwithstanding the release of the new iPhone 14, most people do not absolutely need a new smartphone regularly. The price of televisions dropped nearly as much.
Computer software and computer hardware prices fell as well. Once again, these are not prices typical Americans incur regularly. (Probably not buying non-essentials, this is how long a typical person can live on savings alone in every state.)
Broadly, the drop in prices of a few goods and services means almost nothing to the wider problem of inflation. More and more Americans cannot afford essentials, and this is particularly true for people whose wages have not kept pace with rising prices. Even middle class Americans face enough cost of living increases that their discretionary income may be pressured.
The solution to drive down the prices of a large number of the components in the CPI is probably higher unemployment. Sharply rising costs cuts consumer spending — and with it corporate profits These problems, in turn, trigger layoffs. America has not been in an economic cycle like this for well over a decade. Unfortunately, one huge problem may have to be replaced by another.
To determine the 13 household items that are plunging in price, 24/7 Wall St. reviewed the Bureau of Labor Statistics’ Consumer Price Index Summary August report. Prices are compared to August 2021.
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