Look anywhere in the news and you’ll get the gloom and doom story about how inflation is at unprecedented levels and there’s no indication it’ll stop anytime soon.
However, this graph from the St. Louis Fed tells a different story.
Given all this, we tend to take a more balanced view of inflation.
If you look at inflation overall, the percentage change in consumer prices for goods and services in the United States, across the board, is currently not anywhere near what the increases were in the 1970’s and 80’s.
But that doesn’t mean we’re not feeling the pinch in certain critical areas. According to the Bureau of Labor Statistics, there are major pockets of goods and services where inflation is taking a pretty significant toll.
Some of the largest changes from July to August 2021 were (on a seasonally-adjusted basis):
- Gasoline (all types) +2.8%
- Window coverings +17%
- Living room, kitchen, and dining room furniture +3.8%
- Salad dressing +4%
- Men’s shirts and sweaters +4.3%
Some items are actually showing lower prices from July to August.
- Frankfurters -8.3%
- Dishes and flatware -4.6%
- Laundry equipment -2.6%
- Lodging away from home -2.9%
- Airline fares -9.1%
Year on year comparisons may be distorted due year ago levels of consumption being reduced by the pandemic, however there was an uptick of 5.3% from August 2020.
This was certainly a thought-provoking exercise for us. We noticed that while there were certainly large jumps up in price for some items, there seemed to be a comparable level and frequency of reductions in price for other goods. We also observed that the trends didn’t seem to be linear with any great regularity; a good could increase sharply one month, and then decrease just as sharply the next.
Taking a closer look at the data revealed to us what we already know, that news can often distort the truth about factors prevailing, and that uncertainty regarding income in this country is leading to price volatility on a broad scale.
How you can protect yourself
The path of possible future price increases can never be predicted or controlled. The best measures to take are those fundamental to management of wealth. Ensure that you have a financial plan that maps out how much you’ll need to support your lifestyle, and if you envision price increases having an adverse effect on your ability to afford it, speak with your financial advisor.
The stock market tends to generally outpace the rate of inflation, but this trend is broad and long term. If you are concerned about inflation’s impact on your portfolio, it may be a good time to have a conversation with your financial advisor.
-Judd
Sources
U.S. Bureau of Labor Statistics. (August 2021) Table 2. Consumer Price Index for All Urban Consumers (CPI-U): U. S. city average, by detailed expenditure category. Retrieved on September 21, 2021 from https://www.bls.gov/news.release/cpi.t02.htm
World Bank, Inflation, consumer prices for the United States [FPCPITOTLZGUSA], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/FPCPITOTLZGUSA, September 21, 2021.
Disclosures
The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation