Justin Sullivan/Getty Images
Justin Sullivan/Getty Images
Prices for many things are rising in the US, and John McConnell’s recent auto-shopping experience helps explain why.
McConnell, of Colorado Springs, Colorado, was recently looking for a Toyota Tacoma to replace his two-year-old Nissan Altima and was shocked to see the one he wanted cost several thousand dollars above the sticker price.
He plans to buy it anyway.
“I’m not going through a midlife crisis, I’m just a little itchy for this,” McConnell says. “I’m willing to pay a little more now, I think, because I can afford it at the moment.”
After a year of the coronavirus pandemic, McConnell was eager to do more camping and more outdoor activities. And like many Americans who were able to continue working through the pandemic, he had the money.
“You know a small Nissan won’t make it on a lot of roads here in the winter,” he explains of his decision to upgrade.
The Department of Labor will release its latest inflation reading for the 12-month period ending May on Thursday.
The April reading found that prices were up 4.2% – the fastest pace in more than 12 years, sparking fears of inflation across the country.
Prices are being pushed up by supply chains leading to shortages of key components such as computer chips for cars, hence the higher price Toyota wants for its pickups.
At the same time, the rapid rollout of COVID-19 vaccines is fueling pent-up demand after a year of house arrest, and those who can afford it are willing to pay.
“It just doesn’t stop. People have money in their pockets,” said billionaire investor Warren Buffett, whose Berkshire Hathaway company sells everything from See’s Candies to manufactured homes. “It is by no means a price sensitive economy at the moment.”
At Berkshire Hathaway’s annual meeting last month, Buffett described the economy as “red hot.”
The consumer price index provides a kind of temperature control. The April report found that food prices had risen by 2.4% in the past year. Used car prices rose by 21%. And gasoline prices were up 49.6% from the low price in April 2020.
Still, while many consumers take the higher prices to heart, they are a hardship for some.
Justin Bergin’s work as an art installer has all but dried up during the pandemic. He scraped by selling his own paintings.
“Feeding three kids is not an easy task on a budget at first,” said the single father in Baraboo, Wis. “But now that prices are rising, I find it’s even harder to get a full shopping cart.”
Bergin buys a lot more rice and pasta these days. He also has to say no more often when his children ask for expensive items in the supermarket.
Both the Biden administration and the Federal Reserve argue that the rise in inflation is likely to be short-lived. Some prices, such as air fares, are just returning to normal after a steep plunge during the pandemic. Others are the result of temporary bottlenecks that should resolve themselves as supply overtakes demand.
Rising labor costs are pushing prices up in some areas, but officials don’t believe this is the start of a runaway, upward spiral like the US experienced in the 70s. Chipotle said this week it will raise menu prices by about 4% to cover the new average wage of $15 per hour for employees.
“While we are seeing some inflation, I don’t believe it is permanent,” Treasury Secretary Janet Yellen said. said last weekend. “We will be watching this very closely, keeping an eye on it and trying to address any issues if it proves necessary.”
You could see higher inflation as a sign that the economy is recovering after a very difficult year.
As tough as the past year has been for Bergin, the artist felt a huge relief once he had been vaccinated and was able to see friends again.
“Oh, my God, yes,” Bergin exclaimed. “I went to an art opening and I saw a friend from high school and we hugged each other and I felt a surge of joy wash over me — like, ‘Wow, another adult, another one going through things and us’ be here at the same time.’ It was just wild.”
That is a priceless feeling, which is not reflected in the consumer price index.