I walked into a local store to find an item that I had not purchased in a long time. The good news is, I found it. The bad news is, the price was 48% more than it was two years ago.
I decided that it was time for me to consume less or no more of this item. As much as I loathe Dollar Tree increasing their prices from $1 .00 to $1.25 in one fell swoop, that’s only a 25% increase compared to what I discovered doing this research.
Part of the problem with inflation is that people are working and can afford, for the most part, to pay higher prices for the products they consume, and even add a premium for delivery and pick-up. I wrote about my concerns about the pickup and delivery premiums a few weeks ago. So enough said on that.
They tell us that inflation last month was up 2.9%. Yes, that is true, but what about cumulative and compounding inflation as the prices of items go up on top of previous price increases? That is the true measure of what our money can buy. The inflation numbers are reported by the US Bureau of Labor Statistics and they have a CPI Inflation calculator that anyone can access at https://data.bls.gov/cgi-in/cpicalc.pl?cost1=1.00&year1=200001&year2=202407
I wanted to know what an item, which cost $1 during COVID in January 2000, would cost more than 4 years later in July 2024. It calculated $1.86. That essentially means that the compounded inflation rate over that period of time is 86%!
I said, no way!
They can’t be serious! Not possible!!
So, I kept working with it, putting in different amounts and different years. The inflation rate for January 2021 to July 2024 is 20%. Starting from 2022 to 2024, it is 12%, and from 2023 to 2024, is 5%.
Indeed, inflation is slowing, but it is still compounding.
I then turned from that website to the https://www.usinflationcalculator.com/ — also using BLS as the source website, which calculates the dollar’s buying power, and from 2020 to 2024, it is 182.66 and the cumulative rate is 82.7%. The difference is due to the first site using monthly numbers, while the latter uses annual figures.
The inflation calculator also breaks down costs for various products such as gasoline, utilities, milk, eggs, etc. As an example, for gasoline, from 2020 to 2024, the cumulative inflation rate is 60.2%. By the same token, the cumulative inflation rate for the 10-year period from 2010 to 2020 was 18.7%. From 2000 to 2010, it was 26.6 %, from 1990 to 2000, it was 31.8 percent, from 1980 to 1990, it was 58.6%, from 1970 to 1980 112.4%, from 1960 to 1970, 31.1%. So, the cumulative inflation since 1960 is 962.6%; which essentially means that a market basket or number of items that cost $100 in 1960, costs $1,062.6 today.
Technological advances have certainly caused the prices of certain items to decrease (think cellphones, televisions, computers), but generally, prices have increased over time. Since COVID, there have been supply chain issues, compounded by supply shocks such as the wars and natural disasters, all exerting upward pressures on price.
For consumers, what matters is how much we are actually paying for goods and services. Being told inflation is at a monthly rate of 2.9% means that an item which cost $1.00 last month costs $1.03 now, but the true pain is that the same item cost less than 60-cents four or five years ago. The unfortunate fact is that the new reality is now a new normal and we are not going to be seeing pre-COVID numbers.
Of course, as time goes on, prices of various items will naturally increase; as inflation is a part of life, but the cumulative inflation numbers over the last few years have been an anomaly in recent time. Figure in “shrinkflation” – where fewer items are placed in packages selling for the same or higher prices, and the numbers are even more discouraging. The bottom line is that the monthly inflation numbers just do not give us the true picture. No wonder the inflation rate plus unemployment rate is called the “misery index”.
— Kojo Quartey is president of Monroe County Community College and an economist. He may be reached at kquartey@monroeccc.edu
This article originally appeared on The Monroe News: The pain and misery of inflation
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