It seems like an already tough time for consumers is getting even worse.
Despite a sluggish economy (which, according to Morgan Stanley is dangerously close to entering a recession, but you already knew this because you’re an avid reader of this site), continued high unemployment, and an extremely bi-polar stock market, it appears as if consumers have another big ugly problem to worry about: inflation.
According to the Bureau of Labor Statistics, consumer prices jumped a whopping .5% in July, and is up 3.6% for the past 12 months. Considering wages have barely moved over the past 12 months, 3.6% annual inflation is a big deal:
“We’re looking at a situation where income isn’t growing, so large price jumps right now without job growth and income growth behind it, basically mean that consumers are looking at more of their money going out the door at a time when less of it’s coming back in on an income side,” [Daniel] Penrod said.
The main contributors to July’s higher prices included gasoline (up 4.7%), clothing (1.2%), food (.4%) and shelter (.3%). Considering these are some of the main expenses account for a large chunk of a family’s budget, this is pretty sobering news for already hurt consumers and people living on fixed incomes.
You can read the entire BLS report by clicking here.
Considering the Federal Reserve recently announced it will keep its easy money policies in place through 2013, it’s hard not to imagine a scenario where inflation continues to push upward. After all, this is more or less what the Federal Reserve wants.
Unfortunately, I think they’re going to get it in spades.
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- Stagflation signs: Bond yields down. Gold up (money.cnn.com)
- Inflation: Is it finally back? (blogs.reuters.com)