Cost Of Living Increases By Most Since 2008, Will The Inflation Spike Last?

Consumer prices rose 5% in May on a year-over-year basis, continuing a sharp spike in inflation that began in April where year over year inflation was at 4.2% compared to 2.6% the month prior. Just between April and May 2021, the cost of goods rose .6%. However, the Federal Reserve is signaling that this is a temporary bump that occurred as a result of shortages within global supply chains running into elevated consumer demand. Chief economist with Moody’s Analytics agrees that these market conditions could be fleeting.

“A lot of the surge in prices are for things that are just normalizing… Hotels and rental cars and used vehicles,  sporting events, restaurants. Everyone is just getting back to normal, so pricing is just returning to what it was pre-pandemic,” Zandi said. Used car prices were responsible for over a third of the index’s inflation increase with prices rising 10% in April and another 7.3% in May. Demand for used vehicles has been largely driven by two sources. First, rental car companies are attempting to rebuild their fleets which were sold off during the pandemic and secondly, the ongoing computer chip shortage has slowed the production of new vehicles. Conversely, the cost of housing and medical care, two large drivers of inflation remained relatively static over the last year, with the former seeing a 2.2% rise over the last 12 months and .9% for the latter – which is the smallest year over year increase in the cost of medical care since 1941.

However, rental housing remaining stagnant may just be the result of the pandemic temporarily pushing prices down. The struggle over this last year for many landlords was simply collecting the payments that they were due, let alone trying to raise prices. If these inflation trends continue for too long, it is easy to forecast a rise in rental housing prices as landlords attempt to offset their rising costs from throughout the rest of the market. The big question for market markers and for consumers at this time is – is this just a transitory ripple effect caused by the reopening of many businesses where supply isn’t meeting immediate demand? Or is this the beginning of a larger spiraling out triggered by too much sustained demand in the economy?

Are you struggling to make ends meet with the rapid rise in cost of living? To see how we can help you today, please feel free to reach out to your Yuba City bankruptcy attorney at (530) 797-4402.