Of all the financial concerns weighing on people, we have been seen a major increase in concerns about the rate of inflation we’re seeing in 2021.
That is probably because compared to the 1.8% overall annual rate of inflation in 20191, U.S. consumer prices have seen annualized increases reach record heights.2 Because these higher prices were the result of unusual circumstances, it’s unclear whether or not these inflationary rates will be part of the new normal.
As the ramifications of the pandemic continue to unfold, the compounding effects of rising inflation rate and increased cost of living are becoming more and more prevalent. The U.S. Department of Agriculture reported that retail food prices were 1.8% higher in February 2020 than they had been the year before.3 Not only are the costs of living increasing every day, the projected annualized inflation rate in the U.S. in 2021 is set to be 5%, the highest in more than a decade!4
According to a recent Consumer Price Index (CPI) report, there were some dramatic price increases over last year.
The cost of hotels, Airbnb, used cars, ride sharing services, and even gasoline are at record highs. Many restaurant chains have instituted significant price increases in 2021. Bloomberg reported recently that restaurant prices were up 4% in May 2021 compared to the same month in 2020.5 The culmination of rising costs related to gas and employee pay are major contributors to the increase in restaurant prices, but another major factor is that food itself is simply more expensive. Data from the USDA indicates that prices for "food at home" (a.k.a. groceries) are expected to rise 2% to 3% this year, and that is on top of an above-average jump in 2020 of 3.5%. To put it in perspective, the 20-year average is an annual increase of 2%.6
The fact of the matter is that for the foreseeable future, life is going to be more expensive than it used to be. Now more than ever, having a sound financial plan to guide you is of crucial importance. Don’t worry, our local advisors are always here for you. We have the knowledge, experience, and dedication you need in your corner.
CONTACT US today to schedule a financial review.
Sources:
1. Federal Reserve Bank of St. Louis. "Inflation, Consumer Prices for the United States." Accessed Aug. 2, 2021.
2. "U.S. consumer prices post largest gain in 13 years; inflation has likely peaked." Accessed Aug. 2, 2021.
3. "Food Price Outlook, 2020: Summary Findings." Accessed Aug. 2, 2021.
4. S. Inflation Calculator. "Current US Inflation Rates: 2000-2021." Accessed Aug. 2, 2021.
5. Bureau of Labor, https://www.bloomberg.com/news/articles/2021-06-23/u-s-restaurants-boost-menu-prices-at-fast-clip-to-recoup-costs
6. Food Price Outlook, 2021, https://www.ers.usda.gov/data-products/food-price-outlook/summary-findings/