Economy

Inflationary pressure in the US

November 16, 2021

We are seeing more news about rising inflation,  but in reality the US data isn’t as bad as the news coverage would lead us to believe.  The following table shows the data of seasonally adjusted price changes by month published by the US Bureau of Labor Statistics.

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Food prices are continuing to rise at about the same rate each month with a total rise of 5% for the last 12 months.  Current shortages of fertilizer and the herbicide glyphosate (which we import from China) could result in additional price increases through next year.  Much of the increase is in meat and processed food.  We can save money on our food budget buying in bulk, particularly dried beans and grains.  Learning to cook vegetarian and vegan meals can also save money on food bills.

Not surprisingly, the largest jump in October prices was energy, largely a reflection of the energy crisis in UK and China.  The crisis is spreading and we may yet see additional oil and gas prices rising this winter if temperatures are colder than normal.  US energy prices are far lower than what Europe and Asia currently face.  We should also remember that at the start of the pandemic shut down energy prices plummeted and much of the current increase is making up for it.

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The other big jump in prices this year occurred last spring in the used vehicle market as a result of shortages in microchips impacting new vehicles.  Starting in July price increases have been more modest and may reflect prices stabilizing as the economy returns to normal.  The shortages of semiconductors started before the pandemic and will not be resolved soon or cheaply.  Higher demand for semiconductors will get worse as new technology products develop, including cell phones with 5G, robotics, self driving cars, and all those appliances that are connected to the internet of things (IOT).  As long as we can keep our old technology going, or don’t need to replace our vehicle we can avoid paying high prices.  It remains to be seen where EV will be priced as more companies begin selling them.

report prepared last June for the White House discusses supply chain issues and recommendations to address them.   In the case of semiconductors, higher prices will be us for many years because of the long term investment required.  In other cases, improvements should be seen soon, for example reduced bottle necks at the sea ports as a result of funding available from the recently signed Bipartisan Infrastructure Bill.

Labor shortages since the pandemic have led to rising wages for many workers, but inflation will reduce our buying power.  One thing we can do is learn to be careful with our money, spending it wisely, being frugal.  Americans in particular need to learn to think carefully about our purchases, living below our means in order to save money and provide more financial security for our family.  The bottom line is that if Americans are going to address climate change we will pay more for products and services that rely heavily on fossil energy.  We cannot continue consuming cheap goods imported from countries and then criticize them for burning fossil fuels.  It’s time to wake up and recognize that living on renewable energy will require a totally different lifestyle from the one we’ve been living.

 

Teaser photo credit: Photo by NeONBRAND on Unsplash 

Jody Tishmack

Jody has a Bachelors Degree in Geology, a Masters Degree in Soil Science and a Ph.D. in Civil Engineering. She developed a composting and soil manufacturing process at Purdue University in 1996, which has grown into a commercial business called Soilmaker; selling compost, organic soil, and composted mulch. Her family lives in an earth-sheltered home powered by solar PV energy, where she maintains many of the values and traditions she learned as a child. . She is a regular contributor to Anima/Soul.


Tags: frugality, inflation, powering down