Inflation, Prices of Goods Rose in December

A new report completed by the Commerce Department recently released reveals that inflation, as well as the overall price of goods, rose and remained high in December. Many economists have stated that inflation will remain high, though it will eventually moderate. Thus far, inflation has risen, and December’s annual rate stood at a 5.8% rise. While many factors are attributed to this rise, the increase in energy costs is the main reason, as it rose by 30%.

The core personal expenditures index rose by about 4.9%, according to this new report from the Commerce Department. This index excludes the price of food and energy. This new report, therefore, reveals that inflation and prices rose again from November. Income and wages, meanwhile, rose by 0.3%. 

This latest report also comes after the Fed recently announced their intent to raise interest rates, possibly as early as March, to help tamp down high inflation. Inflation has become a big issue in the United States, and new data suggests that consumers have finally decided to not spend more money on goods and products, especially large items. Previously, data revealed that while consumers were worried about inflation, they would still buy items and spend, even though many goods had become much costlier because of inflation. Now, it appears that this has changed.

This also plays into the economy. Economists believe, as spending by consumers has slowed down already into 2022, that the Fed raising interest rates will help with inflation — and eventually, ideally, inflation will moderate. Inflation as a result of the global supply chain and the COVID-19 pandemic does appear to already be adjusting, which is a positive. Many businesses have stocked up their inventory in the past few weeks and months, which will help the economy as a whole.

In fact, economists believe that the only big growth in the economy in the first few months of 2022 will be from businesses trying to build up their inventory, especially as consumer demand slows down a bit. 

Wages, meanwhile, do continue to increase, though at a slower rate than previously recorded in 2021. New reports recently revealed that even with this wage increase, Americans cannot easily afford goods because of the surge in inflation. A labor shortage does continue to impact the United States, and the ongoing spread of the highly contagious Omicron variant keeps many businesses from having enough workers to successfully run a business. 

However, there are also positive signs here — and this is, again, only boosts for the economy. More workers are continuing to return to the workforce, though rather slowly. However, economists believe the labor shortage will finally cease to be an issue by the end of 2022. Plus, there are also signs that the Omicron variant is slowing down, as infections have finally dropped on a week-to-week basis. 

If the Omicron variant slows down, much like the Delta and previous variant spreads have, then this will help businesses run better, especially as their workers won’t be calling out in mass waves because of the virus.