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The prices of a lot of things are going up in the United States, and John McConnell’s recent car-buying experience helps explain why.
McConnell, of Colorado Springs, Colorado, was recently looking for a Toyota Tacoma to replace his two-year-old Nissan Altima and was shocked to see the one he wanted several thousand dollars above the sticker price.
He plans to buy it anyway.
“I’m not going through a midlife crisis. I just have a kind of an itch for that,” McConnell says. “I’m willing to pay a little more now, I guess, because now I can afford it.”
After a year of the coronavirus pandemic, McConnell was eager to go camping more and do more outdoor activities. And like many Americans who were able to continue working during the pandemic, he had the money.
“You know a little Nissan isn’t going to do the job on a lot of the roads around here during the winter,” he explains of his decision to upgrade.
The Labor Department is expected to release its latest inflation measure for the 12-month period ending in May on Thursday.
The April reading showed prices were rising 4.2% – the fastest pace in more than a dozen years, sparking fears about inflation across the country.
Prices are being driven up by grunts in the supply chain leading to shortages of key components like computer chips for cars, hence the higher price Toyota wants for its pickup trucks.
At the same time, the rapid rollout of COVID-19 vaccines is triggering a surge in pent-up demand after a year of home lockdown, and those who can afford it are willing to pay.
“It just won’t stop. People have money in their pockets,” said billionaire investor Warren Buffett, whose Berkshire Hathaway company sells everything from See’s candy to manufactured homes. “It’s not a price sensitive economy at all right now.”
At Berkshire Hathaway’s annual meeting last month, Buffett described the economy as “scorching red.”
The consumer price index offers a kind of temperature control. The April report showed that food prices jumped 2.4% from the previous year. Used car prices have increased by 21%. And gasoline prices were up 49.6% from the depressed April 2020 price.
Yet while many consumers accept the higher prices on the heels, they are a hardship for some.
Justin Bergin’s work as an art installer pretty much dried up during the pandemic. He scratched himself while selling his own paintings.
“Feeding three kids isn’t an easy task on a budget to start with,” said the single dad from Baraboo, Wisconsin. “But now that the prices are going up, I find it even more difficult to get a full grocery basket.”
Bergin buys a lot more rice and pasta these days. He is also forced to say no more often when his children ask for expensive items at the supermarket.
The Biden administration and the Federal Reserve argue that the surge in inflation will likely be short-lived. Some prices, such as air fares, are just returning to normal after falling sharply during the pandemic. Others are the result of temporary bottlenecks that are expected to ease as supply catches up with demand.
Rising labor costs are pushing prices up in some areas, but officials don’t think this is the start of an uncontrolled upward spiral, as the United States experienced in the 1970s. Chipotle said this week it is increasing menu prices by about 4% to help cover its new average wage of $ 15 an hour for employees.
“Although we are seeing some inflation, I don’t think it’s permanent,” Treasury Secretary Janet Yellen said last weekend. “We will be monitoring this very carefully, keeping an eye on it and trying to resolve any issues that arise if it becomes necessary.”
One could take higher inflation as a sign that the economy is recovering after a very difficult year.
As tough as last year was on Bergin, the artist felt tremendous relief once vaccinated and was able to see friends again.
“Oh, my God, yes,” Bergin exclaimed. “I went to a vernissage and saw a friend from senior school and we hugged and I felt that wave of joy wash over me – like ‘Wow, another adult, another person going through things and we’re here at the same time. It was just wild. “
This is a priceless sentiment, which will not show up in the Consumer Price Index.