Wednesday 19th of December 2018

Inflation Is on the Rise

Inflation rates have steadily risen for most of 2008, fomenting already serious concern over the U.S. and global economies. According to monthly data published by the Bureau of Labor Statistics, inflation rates have been on the rise since April of 2008. August and September showed slight drops, but most analysts view this as an aberration rather than a bucking of the trend. Growing rates are bad news for consumers, especially when wages fail to keep pace. In essence, this erodes the buying power of money, meaning consumers can buy less and less with the same amount of money. In this post, we’ll explore this alarming trend and its implications for the economy.

Inflation Overview

The inflation rate is an economic metric that indicates the rate of increase of a price index (e.g., the consumer price index). A comparable measure is the rate of decrease of the purchasing power of currency. Simply put, this is an overall increase in the average level of prices. Some causes include:

  • Increase in money supply
  • Decrease in supply of goods
  • Decrease in demand for money
  • Increase in demand for goods

The Current Trend

With the exceptions of August and September, rates have climbed every month of 2008 since April. The rising costs of transportation, energy, and food have led to an upward movement in the average prices of a variety of goods, which in turn drives rates upward. Here is the data from April 2008 onward as reported by the Bureau of Labor Statistics:

  • April: 3.94%
  • May: 4.18%
  • June: 5.02%
  • July: 5.6%
  • August: 5.37%
  • September: 4.94%

Implications

Rising rates translates into a concomitant rise in the cost of living. As a result, consumers must earn more and more money in order to afford the same goods and services. Unfortunately, the pace is outstripping that of average earnings. That is, the cost of goods and services are rising far more quickly than is average income. This disparity could be just one of the many problems driving the current economic crisis.