If you have been out and about recently, you may have noticed that prices everywhere are skyrocketing. Grocery trips have become more expensive, gas tanks are much pricier to fill up, and fun clothes are more of a luxury now that inflation has been on the rise.
In 2021, inflation rose to a staggering 7.5% which is the highest it has been since 1982.
Everyday routines have been altered by this inflation – prices in gas rose 41% for used cars and trucks, 40% for gasoline, 18% for bacon, and 11% for women’s dresses.
This rapid increase in inflation began in 2021, and many politicians passed it off as a transitory problem from shipping delays and labor shortages. However, the problem has persisted and grown to the level it is at now, and citizens are rightfully wondering how long this will last, because many people’s budgets are already suffering from it.
Unfortunately, economists have predicted inflation to elevate well into this year.
The good news, if it can be considered good news, is that it was caused by the pandemic. When COVID hit in spring of 2020, businesses took a huge hit and many places had to close, leading to several people filing for unemployment.
However, the economy staged a great recovery due to government aid, and vaccines helped businesses and other companies reopen. This then caused a labor shortage as businesses tried to keep up with the sudden demand that customers had, which then caused a shortage in global shipments.
Costs rose as the supply was low and the demand was high, getting us to where we are today. Economists hope that, assuming COVID-19 is slowing down for good as a pandemic, inflation will gradually go back down and prices will return to the way they were.
So, how long will this last? If companies struggle to keep up with the demand for goods and services, this elevated inflation will still affect us.
The good news is that major supply chains are already starting to improve, but this does not mean that prices of everything are going to start going down soon.
Sarah House, senior economist at Wells Fargo, said, “We’re expecting CPI to still be roughly 4% at the end of this year. That is still well above what the Fed would like it to be and, of course, well above what consumers are used to seeing.”
Many economists have been predicting that the global supply chain struggles may be nearing a plateau, but it is difficult to tell with the unpredictability of COVID-19. They have observed a growing disconnect between COVID-19 and the economy, which is a good sign.
Key sources of demand growth will slow down this year, which could help contribute to the gradual lowering of prices.
Regardless, right now, prices will remain high as inflation continues to creep up. It is breaking many records so it should not come as a surprise the next time you have to pay much more for gas or groceries than you are used to.