Originally Posted On: https://www.credello.com/
‘Supply and demand’ is the foundation of any macroeconomics 101 class, and if you’re having flashbacks to your college lecture hall with all the news around inflation lately, you’re not alone.
According to the Bureau of Labor Statistics, the Producer Price Index increased by 6.6% on an unadjusted basis between May 2020 and May 2021, marking the largest jump since the bureau started measuring that statistic in November 2010.
Meanwhile, the Consumer Price Index also saw a record increase in May. The CPI jumped 5% before seasonal adjustment from May 2020 to May 2021, the largest increase since August 2008, when the CPI rose 5.4% amid the Great Recession.
That correlation to the latest financial crisis may seem like cause for concern, but how does this really affect you as a consumer and what can you do prevent taking a major hit?
What’s causing inflation right now?
Saying that all prices are going haywire is misleading—it’s really only a few categories that are seeing major price surges.
Energy has seen the biggest increase in CPI at 28.5%. That gets broken down into energy commodities and services, and among energy commodities, fuel oil and gasoline saw increases of 50.8% and 56.2% year-over-year, respectively.
By comparison, food only increased 2.2%, with food away from home jumping 4% and food at home increasing by just 0.7%.
How to combat inflation as a consumer
That last point on food is perhaps the easiest and most obvious way to combat inflation: eat at home more than you eat out.
According to the Bureau of Labor Statistics, the average American household drops $3,000/year dining out—whether that be takeout, delivery, or sit-down dining. That’s a big chunk of change. And with restaurants trying to stay alive after a rough 15 months because of COVID-19, dining out could hit your wallet even harder. Of course, it’s important to support small local businesses, but you’ve got to find a balance and stay within your means.
If you’re struggling to keep your head above water while dealing with mountains of debt, a personal loan for debt consolidation can help you stay afloat by simplifying your monthly payment and lowering your interest rate.
During periods of inflation, it’s also important to build up your emergency fund. But parking your money in a savings account might not give you the best return, so you might want to consider finding a high-yield savings account to store your funds and outgrow inflation.
Inflation is a natural progression and can happen for a number of reasons. It’s better than the alternative of deflation. But a massive inflation can prevent people from being able to afford everyday goods and services. The average national gas price was over $3.07/gallon as of June 15, per AAA. You don’t want people having to choose between filling their tank to get to work and buying groceries.
Keep in mind that this inflation could also mean an increase in wages. For example, companies like McDonald’s and Chipotle are trying to get people back to work as we near a post-pandemic life.
-Bureau of Labor Statistics