Inflation is at an alarming high– we’re all enduring the pinch at the grocery store and the pump. The Consumer Price Index rose 0.4% in May and is up 2.8% over the past year. That’s the biggest 12-month increase since March 2012.
What are the Drivers?
There are a lot of factors driving up prices, but the main one is simple: The economy is finally starting to heat up after years of being in the doldrums.
Other main drivers of inflation are the prices of gas, food, and healthcare.
The price of gas has been going up steadily for the past few years. In 2020, the average price of a gallon of gas was $2.60. In 2021, it rose to $2.75. And as of March 2021, the average price of a gallon of gas was $3.03.
Rising food prices
The price of food has also been rising. The main drivers of food inflation are the prices of meat, poultry, and dairy. In 2020, the average price of a pound of ground beef was $3.57. In 2021, it rose to $3.76. As of March 2021, the average price of a pound of ground beef was $4.01.
The rates of unemployment is at a 17-year low, and wages are finally starting to rise after years of stagnating. That’s putting more money in people’s pockets, and they’re starting to spend it.
Increasing interest rates
At the same time, the Fed Reserve is raising interest rates to head off inflation. But that’s only making things worse because it’s pushing up the cost of borrowing.
Higher cost of housing & healthcare
All of this is leading to higher prices for everything from housing to healthcare.
The price of healthcare has also been on the rise. In 2020, the average cost of a family healthcare plan was $19,393. In 2021, it rose to $20,576. As of March 2021, the average cost of a family healthcare plan was $21,422.
So, What Does This Mean for Retailers?
- Well, it means that they need to be prepared for higher prices. They need to start planning how they will adjust their prices to account for the higher inflation rates.
- They also need to be aware of the fact that consumers are going to be more cautious with their spending. So, they need to ensure that they’re offering products and services worth the extra money.
- They need to consider more affordable alternative funding sources like cash advances.
Inflation is a complex issue, and there’s no easy answer as to why it’s so high right now.
However, by understanding the reasons behind it, retailers can be better prepared to deal with the effects of inflation.
Michael Hollis is a Detroit native who has helped hundreds of business owners with their cash advances. He’s experimented with various occupations: computer programming, dog-training, accounting… But his favorite is the one he’s now doing — providing business funding for hard-working business owners across the country.