COLORADO SPRINGS, Colo. – The rise in prices continued through August, according to the latest Consumer Price Index.
From July to August, prices overall increased 0.3 percent, lower than the 0.4 percent many economists expected and lower than July’s 0.5 percent increase. It totals into a year to year increase of 5.3 percent.
“[That] is much higher thatn the target for the Federal Reserve of 2 percent.” said Tatiana Bailey.
Bailey, a Ph.D Economist and director of the Economic Forum at the University of Colorado-Colorado Springs.
She points to key areas where prices rose, sometimes drastically, that are key purchases for people’s everyday lives.
The CPI reports food prices increased nearly 4 percent in the past year .
Shelter cost has gone up significantly, and housing prices rose by nearly one-fifth in the past year across the country. Bailey says, that’s the largest increase for housing costs since the housing bubble of 2000.
Most drastically, gas prices increased nearly 3 percent month to month and over 40 percent year to year. Granted, the 2020 summer saw relatively low gas prices because of decreased global demand, Bailey says disruptions like hurricanes are keeping the oil market more volatile.
“Right there, you have boom, boom, boom, the three things that people absolutely need to live. IF those continue to increase in the double digits, or even the high single digits, that’s still a lot more than what wage increases are.” Bailey explains.
Bailey says she’s noticed two predominating camps among economists right now—those who believe inflation is transitory and will wane as the pandemic does, and those who believe inflation is more structural due to existing issues in the economy. Bailey says she’s sees too many structural issues with the economy right now—such as the skills gap between what employers want and what workers have, child care issues, and an aging workforce.
She believes could take more than a year to settle down, should the COVID-19 virus allow it too.
“We have all these variables and of course the biggest one being: What’s going to happen with these variants that are out there and how is that going to impact consumer confidence?” Bailey explains, “Because, even if governments don’t step in to lock down as we did a year and a half ago, people will still pull back.”
Bailey says there’s evidence of that in the August CPI report which shows travel-related sectors falling.
Airfares dropped nearly 10 percent in prices, a decrease that seemed unlikely earlier in the summer before hopes of a resurgence of normalcy was quashed by the Delta variant.
Lodging prices also dropped nearly three percent.
“The [prices] that didn’t increase are due to Delta and people not traveling as much and, yes that can continue. In some ways, in awful ways, that’s actually a good thing because it suppresses demand, it suppresses price increases, but on the other hand it hurts businesses who rely on that summer traffic.” Bailey says.
Bailey directs the UCCS Economic Forum. Registration for these year’s forum is available at uccseconomicforum.com. It will be held virtually on October 14 from 1 p.m.-4 p.m.