Inflation is back. Or maybe it never went away. The January consumer price index was up 6.4% year over year, only slightly lower than the 6.5% climb in December. Further, prices in January were 0.5% higher compared to December. After months of muted energy prices, they rose again in January, and prices of dozens of goods and services climbed.
Of particular note is the price of food at elementary and secondary schools, which soared nearly 302% in January 2023 compared to January last year. Similarly, food at employee sites and schools shot up about 130%.
The January inflation report is vexing for a critical reason. What appeared to be slowing inflation over the last few months, led many to believe that the Federal Reserve would stop raising rates. Those increases were seen as the only means to curb rising prices. Now, the path is less certain, and the Fed may become aggressive again.
Americans are faced with grim problems that never really disappeared late last year as inflation became less aggressive. Not only have real wages eroded, but to slow the economy, interest rates had to go up – and would likely have to continue to rise. Higher interest rates make running businesses more expensive, and make cars and houses more expensive. Businesses with higher costs of capital often cut jobs. If history is any guide, lost jobs eventually bring inflation down as demand for goods and services declines – sometimes.
There have been periods in the last several decades where high interest rates did not drag down prices, particularly of food and energy. Though economic growth tightened, and job opportunities fell, prices for essentials did not drop. (Here are countries with the lowest gas prices in the world at the start of 2023.)
January is only one month and may be a deviation from the trend toward lower inflation. But it could also indicate a trend toward higher inflation in the first half of 2023.
The costs of some goods and services have become so high that they are barely affordable. The signature example is eggs. Year over year, the price of a dozen eggs is up 70%. But egg prices may not be a good example of overall inflation as the primary reason they have jumped is the effects of avian influenza, which necessitated the killing of millions of chickens. But throwing out the egg example still leaves tens of products that soared in price. The price of butter was up 26% last month – and it was one of a dozen goods and services used daily that had prices that continued to move higher by double digits. (Here is the price of a dozen eggs every year since 1973.)
To determine the 40 household items that are soaring in price, 24/7 Wall St. reviewed the Bureau of Labor Statistics’ Consumer Price Index Summary January report. Prices are compared to January 2022.
Click here to see the 40 household items that are soaring in price.
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