With all the talk of a quick inflation jump, people might be confused about what is actually happening to prices. Here’s a very simplified explanation of what’s happening to the price of many everyday goods.
The price of some common groceries and other goods went up a lot earlier this year. While it’s hard to say exactly why, there have been a lot of things that have happened to bring prices higher.
There was a virus in some Korean seafood and some dairy products, leading to a shortage of some products that are in high demand during the summer months. People were also confused about the price of milk, as the price was going up and down a bit.
There have also been problems with railroads, which could affect the price of a number of products that have to be transported.
As you can see in the graph above, prices increased after the global financial crisis, when people were still feeling pain from the recession. And now the recovery has petered out, and more of the pain may be waiting for us.
On the other hand, there is a lot of controversy about just what is happening in the inflation numbers.
A lot of people are blaming tariffs — which will affect certain products — for the increase. A group called the National Association of Home Builders also thinks tariffs are to blame.
Then there’s the payroll tax hike that went into effect at the beginning of the year, which raised the retirement contribution from 5 percent to 6.2 percent. This increased the price of many types of materials for home construction — and also made us think that going back to work would lead to higher wages. This was definitely a wild idea — in fact, it was voted down by one house of Congress earlier this year.
Once again, the uncertainty around inflation and the post-GFC effect are two factors that could determine whether we have an inflation problem this year or not.