Finance Globe

U.S. financial and economic topics from several finance writers.
3 minutes reading time (567 words)

Inflation Picks Up the Pace

Inflation rates in the U.S. have risen faster than economists have predicted. According to the Bureau of Labor Statistics of the U.S. Department of Labor, the Consumer Price Index for All Urban Consumers (CPI-U) rose at a rate of 5.6 percent for the twelve-month period through July of 2008. This is the fastest leap in consumer prices since 1991. Producer prices have escalated by 9.8 percent, the most since 1981.

A nearly 30 percent increase in the price of energy over the past twelve months has significantly contributed to the high-paced inflation rate. Producers, faced with higher expenses in production, have dramatically raised consumer prices to cover those increased costs. Manufacturers, food producers, and the transportation industry have all felt the pain of higher fuel costs, and so have the consumers who depend on their products and services.

Transportation prices increased 1.4 percent in July, amounting to a 13.4 percent increase over the past year. Prior to seasonal adjustment, gasoline prices are 37.9 percent higher than they were in July of 2007. Airline fares, prior to seasonal adjustment, are 19.9 percent higher than they were in July 2007. Any good news? No, a .8 percent drop in the index for new vehicle prices and .1 percent drop in used car and truck prices isn't really anything to get excited over.

The food index had an increase of 6 percent in the past year, mostly driven by higher corn and wheat prices, and affects all foods derived from corn and wheat, or food that is produced through the use of corn and wheat, including meat and dairy products. The biggest index increase in the food category was in the cereal and baked goods index, 1.8 percent higher in July, and 12.1 percent higher than it was a year ago. The rising price of fresh produce, increasing at a rate of 1.2 percent in July and up 10.4 percent from a year ago, also contributed heavily to higher overall food costs.

The price for housing has increased by 3.9 percent over the last year through July. Household energy prices have gone up by 3.8 percent in July, at an increase of 18.2 percent over the past twelve-month period. The index for natural gas rose by 7.4 percent in July, for the sixth consecutive large price increase, and 32.7 percent higher than it was twelve months ago. The index for electricity went up by 2.5 percent in July, after a .1 percent price decline in June.

Medical care prices have increased by .1 percent in July after a .2 percent increase in June. Over the last twelve-month period through July, this amounts to a 3.5 percent increase. Recreation prices have gone up by .4 percent in July, after a .1 percent increase in June. The index for education and communication increased by .5 percent in July.

The CPI-U is determined by the price of a basket of goods that are meant to represent the expenses of a typical American household. Average prices are taken from sample stores across the country by the U.S Department of Labor. The percentage change in that index gives us the rate of inflation for those types of purchases. The CPI-U is a statistical estimate that is subject to some error, since it is derived by taking a sampling of prices and not the entire universe of all prices.



Sources:
The U.S Department of Labor
economist.com
Your Credit Utilization Ratio
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Friday, 23 August 2019

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