Prices Continue to Rise
The Consumer Price Index (CPI) report released today showed inflation remains elevated and continues to affect many household budgets.
Much of the increase was tied to energy costs.
When most people think about energy, they think about gasoline prices. But energy is not just another item in the inflation basket. Energy helps power factories, move goods across the country, and stock store shelves. When energy costs rise, consumers often feel it directly at the gas pump and indirectly in many other places as well.
That is one reason inflation can be so frustrating. Higher energy costs don’t always stay in one place. They can eventually show up in transportation, food, and many of the goods and services we buy every day.
Inflation Changes Behavior
One thing I find interesting about inflation is that it doesn’t just change prices. It changes behavior.
For example, I recently purchased my Canon EOS RP camera. Had I not been using it for my website and photography, I probably would have delayed the purchase a while longer.
I have also been thinking about buying a car. Today’s inflation report makes me pause and think that perhaps saving a little longer and waiting might be the better choice.
I suspect many households are making similar decisions.
Maybe it’s eating out once instead of three times a week.
Maybe it’s buying one shirt instead of two.
Maybe it’s putting off a major purchase for a few more months.
Maybe it’s waiting for a sale before replacing an appliance that still works.
None of these decisions seem significant on their own. But when millions of households make them, they can have a meaningful impact on the economy.
Consumers Are Being Cautious
A word that keeps coming to mind lately is “cautious.”
Consumers appear cautious.
Employers appear cautious.
The Federal Reserve appears cautious.
Many households are not panicking, but they are thinking more carefully about how they spend their money.
That doesn’t mean the economy is in recession. It doesn’t mean consumers have stopped spending. It simply means many people are taking a closer look at their budgets and making more deliberate choices.
The Bottom Line
Today’s CPI report reminds us that inflation remains a challenge for many households.
The financial media will spend plenty of time discussing whether the report came in above or below expectations. For most consumers, the more important question is much simpler:
Are prices still rising faster than we would like?
For many Americans filling up their gas tanks, shopping for groceries, paying utility bills, or visiting the doctor, the answer is probably yes.
Additional Resources
Consumer Price Index (CPI) Report:
https://www.bls.gov/cpi/
Willie and I appreciate every reader.