Inflation

Inflation in the U.S. and How it is Affecting Prices

By Kayla Bernescut

Since September of 2021, inflation rates in the US have drastically increased by about 3.7% in June of 2022 and about 2.9% in August of 2022. Price inflation is now at its highest in 40 years and is affecting the retail market for consumers, especially in the gas and food industries. These changes are causing many people to adapt by dining in more often, purchasing cheaper products, and shopping at discount stores.

Inflation is when the prices of everyday goods and services rise, and the money earned and saved by consumers today is less valuable than it once was. The enormous sums of money acquired from the government’s many stimulus packages helped demand return. They helped consumers receive more money to purchase supplies, but unfortunately, it was not enough to help the global supply chain. Combined with preexisting supply chain disruptions, this increase in demand placed a considerable strain on the global supply chain, causing prices to rise beginning in April 2021. The stimulus had a positive effect on the economy, but the Covid-19 pandemic shifted consumers’ spending toward goods rather than services. Experts say that the Biden administration’s $1.9 trillion American Rescue Plan Act of 2021 “overheated the economy and ignored signs it was bouncing back” (NBCnews.com). Of course, the Biden administration denies this accusation and instead points its finger toward the supply chain struggles and businesses independently driving up prices.

Although retailers are doing everything they can to keep prices down, many have been forced to raise the prices of their goods to meet the increased costs. They are paying higher energy bills and rent, not to mention rising transportation and wage costs. Apart from products, the prices of most essentials for brick-and-mortar businesses such as hangers, display stands, and promotional items have also skyrocketed, facing serious production and shipping delays.

Taylor Offer, the founder of Feat Clothing, speaks out about the difficulties of opening their first business in the midst of inflation: “Opening up a brick-and-mortar store in this climate has been really challenging,” they say. “There are so many moving pieces that we need to source, from retail racks to couches and hangers, that are all delayed months. We are seeing eight-to-twelve-week delivery times, and significant price increases on basic items that are usually always in stock. It definitely makes you value the global supply chain and how competitively priced things used to be.” According to the bar chart above, the top three areas that have the highest price rate increase percentage are grocery bills (75%), gasoline (74%), and meat (73%).

“Shortages of fertilizer from Ukraine, poor harvests, and livestock illness all contributed to rising grocery prices” (washingtonpost.com). With the enormous demand for goods, Grocery prices have been rising drastically because of the increased consumer, restaurant, and global market demand collided with labor shortages and higher transportation costs. “Energy prices spiked across the world after Russia, a major global supplier of fossil fuels, invaded Ukraine” (washingtonpost.com). This is why gas prices have increased from $2.50 per gallon to $3.87-4.99 per gallon. With inflation rates exceeding the 40-year high, retailers are in deep waters about their businesses and what they should do to manage them efficiently and effectively. While the confusion about the causes of inflation may seem chaotic and attributable to multiple factors, it’s important to remember that it exists today, and is affecting many retail businesses as well as people. Whatever the cause, the main point to derive from this is how much inflation has taken a toll on the nations’ economies and the retail industry. Andrew Levin, an economics professor at Dartmouth College says: “My guess is that it’s going to be a number of years away… It’s an open question whether it’s possible to get there gradually or painfully with a recession.” It’s important to acknowledge the fact that inflation will most likely be around for a while until a resolution is reached.