We're finally coming out of the pandemic...
And now it looks like the next epidemic will be…inflation. Prices are skyrocketing everywhere, on everything, but why? There’s not just one reason. You’ve got the tight labor market thanks to layoffs and extended federal unemployment payouts. You’ve got raw material shortages and manufacturing delays related to pandemic shutdowns.
OPEC+ staying united is keeping gas prices high, and many other factors are working together to empty your wallet. So, for now, trim your discretionary expenses, look into tactics like couponing and shop sales as much as possible, buying only what you absolutely need. You’ll make it!
Consumer Q & A
I’m trying to heal financially as life returns to pre-pandemic norms, but with prices skyrocketing on many commodities, like groceries and gasoline, is making a financial rebound a challenge. Why are prices skyrocketing right now?
The jump in prices of many goods is proving to be a formidable challenge to millions of Americans who are attempting to recover from the pandemic. There are several compounding factors triggering the rise in prices across multiple industries, and the upward trend is likely to continue for a while. Here’s what you need to know about the sky-high prices dominating the post-pandemic economy.
How much more do groceries cost compared to a year ago?
A trip to the grocery in 2021 doesn’t come cheap. According to new data from NielsenIQ, all 52 tracked food categories are more expensive now than they were a year ago. The cost of fresh meat, for example, shot up by 8.6% from May 2020 to May 2021, while processed meats jumped by 9.2% and the cost of eggs has seen a nationwide increase of 8.2%.
What is causing grocery prices to rise?
Many factors are causing grocery prices to skyrocket, according to recent article from NBC News.
For one, the pandemic caused a shortage in many materials due to prolonged disruptions in the labor force and supply chain, increasing demand and prices of goods. Grocery items saw a surge in demand due to many Americans cooking at home while on lockdown. Industries are suffering from shortages and don’t expect to recover for a while. The Bloomberg Commodity Spot Index tracks 23 raw materials and is at it's highest level in nearly a decade.
Second, there is a shortage in the labor market, which can likely be attributed to the extended pandemic unemployment insurance. Employers are forced to offer more pay for attracting workers. They then pass this extra cost on to consumers.
Finally, the increase in prices can be linked to the rise in transportation costs as gas prices continue to rise, which we’ll explore more in a moment. Again, this increased expense is passed on to the shopper through higher prices on consumer goods.
Why are gas prices soaring to new heights?
It’s sticker shock at the gas pump these days, with prices as high as $4 per gallon in some parts of the country.
Many factors are contributing to the rise and fall in gas prices. The fluctuating price of crude oil is the most prominent factor. According to the U.S. Energy Information Administration (EIA), approximately 60% of the money paid for a gallon of gas covers the costs of the crude oil that went into making it. Another 25% pays for costs of refining, distributing and marketing gas. The rest pays for taxes.
In a recent article from Forbes.com, several factors driving the price of crude oil to skyrocket were explained:
- Basic rules of supply and demand. The last few months saw a loosening of COVID-19 restrictions around the globe. This led to an increase in the demand for gas and crude oil. In contrast, at the height of the pandemic, demand for crude oil fell sharply and so did its price tag.
- The presidential election. Crude oil prices spiked by an average of $0.75 per gallon since Nov. 3, 2020. The oil markets may see the current administration as one that will inhibit U.S. oil production, leading to a tightening on the global oil market. Traders responded by driving up the price of crude oil.
- Seasonal market changes. The price of crude oil tends to rise and fall with the seasons. Prices generally rise in the spring and summer as more motorists hit the road. The changeover to summer gasoline blends leads to a jump in gas prices as well.
- Change in the value of the dollar. Oil is priced in U.S. dollars within the world market. When the dollar is strong, relative to other currencies, crude oil is cheaper for Americans and more expensive for the global market. When the dollar is weak, as it is now, we oil prices skyrocketing for Americans.
- Strong discipline among the OPEC+ nations. When the nations which are part of OPEC+ stick to their agreement to cut back on oil production, prices increase.
What can I, as a consumer, do about prices skyrocketing?
Unfortunately, there’s not much consumers can do to bring down the costs of common goods. However, there are steps you can take to help you manage these costs in a financially responsible manner.
- You’ll likely need to make some changes to your monthly budget to accommodate the higher costs of groceries and gas. Shuffle your spending categories by trimming discretionary expenses until you have enough money to cover the costs of food and transportation.
- Incorporate cost-saving techniques you may not have needed until now to help manage increased expenses. Couponing, shopping sales, and cutting back on impulse buys are all ways to help curb unnecessary spending. To save on gas costs, consider walking to work or to do your errands, carpooling when possible, or using public transportation, is available to you.
If your budget is still coming up a little short, consider applying for an unsecured personal loan from Harvester Financial. With great, low rates and flexible terms, a Signature Loan from Harvester Financial may be able to help you bridge a financial gap.
Skyrocketing prices are hard on the wallet, but with proactive steps, you can stay on top of your finances and bring your financial health back to pre-pandemic norms.