We’ve been pretty lucky over the last ten years in terms of inflation, which has remained at about 2%. However, if the Wall Street Journal is correct, our luck is about to run out.
The price of just about everything is set to increase in the coming months. Part of this is because manufacturers and suppliers are facing rising costs, just like the rest of us.
Airlines are paying about 40% more for jet fuel than they were a year ago. Trucking costs were up 7% annually in September, as trucking companies passed along their own higher labor costs. Private-sector wages and salaries in the September-ended quarter rose 3.1% from a year earlier, the strongest gain since 2008, the Labor Department said Wednesday.
Meanwhile, U.S. manufacturers are paying roughly 8% more for aluminum and 38% more for steel than a year ago as the industry adjusts to tariffs the Trump administration levied on imports of those metals. Also, a 10% tariff the administration imposed in September on $200 billion worth of various goods from China is weighing on businesses that buy those imports. (source)
With that being the case, it isn’t surprising that those costs will be passed on to consumers.
What is inflation?
Here are some basic facts about inflation from Investopedia.
- Inflation is a sustained increase in the general level of prices for goods and services.
- When inflation goes up, there is a decline in the value, or purchasing power of money.
- Variations on inflation include disinflation , deflation, hyperinflation and stagflation.
- Theories as to the cause of inflation are up for debate. Some common theories include demand-pull inflation, cost-push inflation, and monetary inflation.
- When there is unanticipated inflation, creditors lose, people on a fixed-income lose, menu costs go up, uncertainty reduces spending and exporters aren’t as competitive.
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