US Inflation Rate Rises to 9.1 Percent
Inflation increased to 9.1% in June 2022, the highest it has been in 41 years. It has increased by that rate when compared to June last year. This is the highest rate it has been in the United States since November 1981.
The increase in inflation has directly had an impact on the cost of living, including the price of fuel, food, and rent. The rise in inflation has been far greater than that forecasted by economists as the COVID-19 pandemic ravaged global economies and devastated communities in regard to businesses and employment.
The increase in the inflation rate has negatively impacted the public’s purchasing power, reducing it as people begin to only purchase necessities to save money. The continued increase of inflation is a concerning trend as it means wages will continue falling behind the cost of living.
Inflation in the United States is driven by a multitude of factors, which are strong demand, a limit on the number of goods, and service-sector pressures. According to reports, strong demand rises from the fact that consumers are spending a lot more.
The COVID-19 pandemic, along with the resulting lockdowns, prevented people from spending during that period. The money saved during that time, as well as financial support from the government, has created purchasing power and, hence, high demand for goods and services from consumers. The limit on the quantity of goods can once again, be attributed to the COVID-19 pandemic.
Lockdowns all over the world disrupted the operation of manufacturers and factories, especially in China, meaning fewer goods were produced. The flow of supply chains was disrupted by the pandemic as well, meaning goods and consumables were not as readily available as before.
More insight to the recent US inflation…
The gradual return of society to normalcy means that more people are eager to go and spend time outside in restaurants, holiday resorts, and vacations. The high demand for these services means more money will be charged for their provision.
As widely reported, the conflict between Russia and Ukraine has not helped economic matters. The two countries are major suppliers of oil and wheat on the global market.
The conflict and sanctions imposed on Russia by the US and several European countries have disrupted those supply chains and therefore caused a shortage that effectively raised fuel prices across the world. Several countries have felt the effects of the conflict with inflation increasing in several countries.
The exorbitant rise in fuel costs has led to protests and a rise in violent crimes in several nations and people struggle to afford basic necessities.
“Rather than cooling down, inflation is heating up,” Sal Guatieri, senior economist at BMO Capital Markets, said. “While a pullback in gasoline costs in July and reported retail discounting will help tamp down the flames, the broad pressure in the core rate, led by plenty of inertia in rents, suggests inflation may not peak for a while and might remain stubbornly high for longer than anticipated.”
The continuing increase of the inflation rate has led to speculation that the Federal Reserve might aggressively increase the interest rate, an outcome that experts claim will slow the economy’s expansion and will likely lead to recession.