RALEIGH, N.C. (WNCN) – The cost of living has continued to rise, hitting a historic high.
Last month the U.S. Labor Department says consumer prices increased more than expected rising eight-tenths of a percent. That is the biggest yearly increase since 1982.
All this can be traced back to the pandemic and because we’re in a worldwide economy, it doesn’t look like it will end soon.
Here’s an explanation as to why prices are inflating.
It’s all supply and demand. When supply is high and there’s not much demand, prices go down.
When there’s not much supply and demand is high, prices go up. You can blame the Coronavirus and its variants for all this.
“We’re still coping with this virus,” said NCSU economist Dr. Michael Walden. “It’s really running the economy and has been for the last two years.”
Prices have shot up in every sector of the economy. Here are some examples.
- Gasoline is up 58.1%.
- Food prices jumped 6.1%
- The cost to shelter yourself increased 3.8%
For petroleum, the increase is because oil companies lost money during the pandemic when travel dropped, so they are now limiting the amount of oil they produce to keep the prices high.
“Oil producers, particularly outside our country, are really in charge and are enjoying what’s going on,” said Walden.
As to why the supply of other things is low, workers in retail, transportation and the hospitality sectors haven’t returned since the economy started opening up.
“If we had a normal supply, all companies would be producing more, and the stuff would eventually reach our shelves and even though people are buying more, there would be more to buy,” said Walden.
How does this play out for 2022? Walden said it’s going to continue.
“The only question for 2022 is, will there be a little pullback in the inflation rate?” he said.
As the economy tries to reopen, there’s a surge of demand to buy things.
“People are trying to buy more, but the supply is being reduced,” said Walden. “I’ve never seen that in my 40 years as an economist. That recipe is bound to cause inflation.”
“The inflation we’re suffering is really incinerating our paychecks.
Walden believes that will affect our standard of living in the coming year.
“Wage increases are being immediately eaten up by inflation, so people have to look at 2022 as the year their standard of living will not go up,” he said.
As long as the covid variants continue to emerge, the inflationary trend will continue.
“We’re still coping with this virus,” said Walden. “It’s really running the economy and has been over the last two years. And it will continue to run it in 2022.
The only way inflation will abate is when supply and demand begin to equalize. As to when the pandemic will allow that to happen, it’s anybody’s guess right now.