As the United States continues to experience growing inflation, rising prices are affecting practically every sector of the economy, but the negative consequences of this moderately high inflationary environment on consumers are unequal.
Those who rent and spend a significant portion of their income on food and energy are likely to see their budgets tighten as pay increases lag behind inflation. Rising costs may be evident, such as at the gas pump or at the grocery store, or they might take the shape of shadow inflation, which occurs when the quantity or quality of commodities decreases but prices stay steady.
Individuals who do not own stock – roughly 44 percent of Americans – are at significant danger, in addition to low-income families.
"It's even more crucial to get your money working for you in the stock market in a modestly inflationary climate," says Alice Finn, creator of PowerHouse Assets and author of "Women who are financially savvy have a strong desire to accumulate wealth." If you put your money into a bank account right now, you're losing money by definition. Bonds, too, are dangerous at the moment."
Simplified examples of the cost of inflation
Food
According to the CPI, the average price of food has increased by 4.6 percent in the past year. Certain foods have grown in price more than others, and the cost of beef, in particular, has climbed significantly: In September, the average price of beef was $4.79 per pound, up from $4.17 per pound a year ago.
"Food and energy had the largest influence on the September results," says Iwona Cholewa, chief investment officer of PowerHouse Assets. ""Despite the fact that such payments make up a considerable part of most people's budgets, economists prefer to keep such amounts out of the core inflation statistic."
Housing
According to the Zillow Observed Rent Index, which estimates the mean of stated rentals in the 40th to 60th percentile range for all houses and apartments in a specific location, rent in the United States cost about $1,824 in September.
This is up from $1,671 in September 2020 in the United States, although rent costs have risen more sharply in other sections of the country. From September 2021 to September 2022, the average rent in the Miami-Fort Lauderdale area climbed from $1,998 to $2,323.
"Those who own houses, on the other hand, will likely see the nominal worth of their property rise at the rate of inflation, while those who own investments such as The increase in nominal value would benefit equities. "A low interest rate environment," writes one analyst, "makes future cash flows worth substantially more in today's currency, driving up firm values." Gary Zimmerman, managing partner of Six Trees Capital in New York and founder of MaxMyInterest.com.
Energy
According to the CPI, the average price of petrol has risen 42.1 percent from September 2020, reaching $3.27 a gallon in September.
A mismatch in demand and supply may be blamed for increasing costs in gas, food, and housing.
"It's plausible that the current inflationary situation is the result of supply shocks rather than demand weakness," Zimmerman adds. ""Understanding this dynamic is crucial, since if prices are rising due to a lack of supply (due to labor shortages, port backlogs, etc. ), it's a sign that something is wrong.", monetary policy will not solve the issue, but may worsen it."
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