Inflation news fills the air. Partly I think it’s due to an unprecedented run of low inflation. It’s been a dozen-plus years since we managed to creep far above 2-2.5%. Nonetheless, that was yesterday. Who cares? Nobody cares about inflation that didn’t happen.
Meanwhile, the average inflation rate, the Consumer Price Index (CPI), is just that an average. Since the graph was made, we logged three more months of relatively high inflation to end 2021 at 7% annual increase. As I have discussed before, each of us has a personal inflation rate depending on what we consumer. Does that ever make a difference, as this chart of some selected goods in the volatile food and energy categories. In fact, using a personal CPI calculator showed our inflation rate to be an embarrassing 0.8%. Obviously, we don’t do much expensive stuff, and power tools have remained affordable.
These are percent increases, which can cloud the issue. I talked this year about how eggs are an astonishing bargain, so a 12% jump on a roughly $1 egg isn’t felt like the whopping jump in used vehicles.
The other thing to note is how the CPI jumped from month to month. COVID is messing with all our data, and we don’t have any similar situation to for comparison. I expect some bad decisions will be made as a result. And there are citizens who finally have had their years of warning about imminent inflation finally come true. That is almost a stopped clock phenomenon, however. The wildest future I can imagine is spending winding down as the pandemic savings are exhausted. That seems to be the way Wall Street sees it as inflation expectations remain below 3% for the year in 2022 and lower in 2023. That seems to be what the bond market is telling us as well.
While inflation is a real and present danger, some stuff remains remarkably cheap. For example, as February begins, it is time to add to my stylish collection of plaid flannel shirts on sale at the farm supply store for five bucks or less. I already replaced our bedroom TV so I could tell the actors without glasses.
