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First topic is inflation. Could be good if you're trying to get swoll at the gym, but is it good for the US economy?
Here's what this is all about. Inflation, simply put, is when prices go up and your money doesn't buy as much. Furniture, airplane, tickets, used cars, rent, personal care items like soap, all of this stuff got more expensive last month.
One reason is because gasoline prices have been skyrocketing. They were 22 and 1/2% higher this March than they were last March. This is cutting into family budgets, the cost of living, and it makes it more expensive to ship the items we buy. Coronavirus played a role. When more people were staying home and businesses were shut down, demand for gasoline dropped and so did its price. With people getting back to the office, back to traveling, and businesses reopening, gas prices are shooting upward.
Supply and demand also factor in. Many Americans are in the market for new homes, new bicycles, and many other goods. But the inventory of these things is exceptionally low. So that's driving prices up. But if they go up too much too fast, people may pull back on spending and buy less. And that can hurt the economy.
Since last year, America's bounce back from COVID-related problems has been faster than many economists expected. Some are neither surprised nor concerned that inflation would rise more than usual in early 2021. But others are concerned by how much it's rising by. Many banking officials are comfortable with an inflation rate of 2% per year. They believe this is just the right amount to keep price rises moderate, but also to keep the economy growing. But between March of last year in March of this year, consumer prices rose by 2.6%, more than half a percentage point higher than bankers comfort zone.
And the question is, is this temporary and likely to level out as the year goes on? Or is this a sign of sustained inflation on the horizon? No one knows the answer to that yet. One thing economists do agree on is that the cost of goods will probably keep rising through the summer.
