(WJET/WFXP/YourErie.com) — It’s not just in your imagination – your bills have increased, and inflation is the cause.

The U.S. Bureau of Labor Statistics (BLS) tracks data on the price of goods and wages. That data is made available through the bureau’s website.

According to the BLS data, from February 2021 through February 2022, the average price consumers pay for goods has increased by 7.9%.

“That’s just the overall numbers, so it kind of hides some other things that are interesting,” said Dr. Kenneth Louie Ph.D., an economist and the director of the Economic Research Institute of Erie at Penn State Behrend.

Louie pointed to specifics within the BLS consumer price index (CPI – a list of average prices for goods and services throughout the country). According to the CPI, energy prices increased by more than 25% during that 12-month period. Fuel oil increased by 43% and gasoline is up 38%.

Those numbers are from February to February. The Russian invasion of Ukraine happened on Feb. 24 and the resulting sanctions against Russia have had a dramatic impact on gas prices. The average price for unleaded gasoline was $3.592 in the CPI for the month of February 2022. According to AAA, the national average for gas was $4.139 as of April 8. That’s an increase of more than 15% in about a month.

“The BLS is the source of all of this information. The most recent data is for the month of February, and the month of March won’t be released until next Tuesday,” Louie said.

In general, food prices have increased by nearly 7.9%. The BLS publication “The Economics Daily” reported that the price of meat (all meats, including beef, poultry and fish) had increased 13%, and fruits and vegetables prices were up 7.6%.

Louie says the price changes at the supermarket “feel so dramatic” because it essentially is, compared to what we’re used to.

In an average year – specifically for the past five or six years, Louie said – inflation has hovered around 2% per year.

“All of the sudden after the pandemic eased up, over this past year prices went up by 8%. If we’ve been accustomed to seeing prices going up 2%, that’s somewhat modest. This year, you go to the store and everything is up 8% and that’s much more dramatic,” Louie said.

Further, context is everything. Inflation hasn’t risen this dramatically since 1982, Louie noted.

“Most people who didn’t live through those years in the 1970s and ‘80s really haven’t seen this dramatic of an increase of price over a 1-year period,” he said.

Causes

Currently, the war in Ukraine and its resulting sanctions and supply interruptions are a driving factor in inflation, but Louie notes that even before that there were interruptions in supply chains and production caused by the pandemic.

“There were shutdowns of production, and when you have those kinds of bottlenecks, as long as people want to buy those goods and services even though you don’t have it, that’s what pushes those prices,” he said.

Even though Russia isn’t a major supplier of oil to the United States, that’s not the case worldwide. Many European countries and economies rely on Russian oil.

“When you disrupt their supply chains, it feeds into our supply chains,” Louie said.

And while production shutdowns from the pandemic may no longer be an issue in the United States, companies now are dealing with “worker shortages,” Louie explained. To attract more employees, businesses have increased their wages, and higher wage payments contributes to higher costs resulting in higher prices.

And those stimulus checks that nearly every American received across the country? Those might have been not well executed, in hindsight.

“On the demand side, some economists point to the fact that the stimulus the government provided was perhaps a little bit excessive,” Louie said. “The trick is to strike a right balance. I’m not saying there should never be stimulus – when you think back to the pandemic, there were people suffering, and if you go back in time, certainly there was unanimous support for the stimulus payments.”

How much more?

When the pandemic was first beginning to wane in the fall of 2021 (before the Omicron wave), economists had repeatedly stated that inflation was “transitory,” meaning it wasn’t permanent. That line of commentary from leading economics now has faded. Louie says he “always had the view that it wouldn’t be transitory and it would probably last for a while.”

“The reason I had that opinion was because of the severity of the pandemic and all the effects of the pandemic,” he said, noting supply-chain interruptions and workforce shortages. “I’ve never had the opinion that it would skyrocket out of control and be really in the double digits. But things are always changing, so if the inflationary environment continues to worsen, I would modify my views.”

Louie said the dramatic inflation we’ve seen will “last a while, but it probably won’t spin into the double-digit inflation rates that we saw in the ‘70s and ‘80s.”

Though we’re currently experiencing 7.9% inflation, leading economists from prestigious and reputable institutions have forecasted inflation to ease to 2.7% next year, then ease to 2.3% the following year.

The current period of dramatic inflation has been a “perfect convergence of all the right factors that put the economy into that direction,” Louie said.

“It’s something you really don’t see very often,” he said.

The way to ease inflation would be to improve productive capacity of the economy — that is, to keep goods moving through ports and to keep skilled workers working. If the ports are clogged, keep the ports open for longer hours, and if a workforce is lacking a certain skill, invest in workforce training, Louie said.

“Anything to increase production will relieve the pressures,” he said. “But it won’t happen overnight. It will take years. Just like the infrastructure bill that was passed – it’s a good start, but it will take many years to implement and increase our productive capacity.”

And while dramatic inflation may not last forever, it’s still impacting the average American’s wallet in a real way.

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“What it boils down to is workers are suffering a reduction of purchasing power. Their disposable incomes are falling in terms of what they can buy,” Louie said. “Wages are going up, but when we account for inflation, in real terms, the real wages are falling.”