The latest CPI numbers came out for September 2024. The CPI was up 0.2% for the month, while the year-over-year now stands at 2.4%.
The less volatile median CPI showed an increase of 0.3% for the month. The year-over-year median CPI is 4.1%.
The general consensus from the financial media talking heads is that things are improving because this is the lowest annual price inflation reading we’ve seen since early 2021.
I can’t emphasize enough how a falling rate of price inflation isn’t any kind of great victory. Sure, we could be showing a year-over-year increase of, say, 8%, which would be far worse. But we shouldn’t act as if 2.4% is really good news, even if we are to believe the statistics.
The problem is that the 2.4% increase over the last year is on top of the even bigger increases we saw the two years before that.
Imagine a couple who had their house broken into 4 times last year. This year, their house was broken into 2 times. The husband announces to his wife, “Good news, we’re trending in the right direction.” Meanwhile, they still haven’t recovered any of their stuff that was stolen from last year.
Car Insurance
This CNBC article gives a breakdown of the (price) inflation figures. It shows eggs have risen almost 40% over the last year. That actually doesn’t line up with my own personal experience. I have seen egg prices rising again, but the worst I saw was in 2021 and 2022.
What does line up with my own experience is motor vehicle insurance, which is up 16.3% according to BLS data. I expect this is felt by everybody who owns a vehicle that is insured.
This is a great example of where it is hard to measure price increases and how much they impact people.
Imagine a family that owns two vehicles. Last year, they were paying $3,000 in annual premiums for insurance, which was already up a lot from the year before. It went up by 16.3% in the last year. It is now $3,489 annually. That is an additional $489 they are paying from the year before, which was already a struggle.
An extra $40 per month doesn’t seem like a big deal, but that is the increase for just that one thing. What if the family makes $70,000 per year and is living paycheck to paycheck? That $40 extra per month for that one thing makes a significant difference. Now start adding in the additional costs for food, homeowners insurance, health insurance, and the actual cost of a new vehicle or vehicle repairs.
If you have a family making an income of $20,000 per month ($240,000 per year), then those additional expenses are easily handled. That extra $40 per month for car insurance isn’t nothing, but it doesn’t have much of an impact on the family pulling in $20,000 per month.
It is, however, a big deal for the family making $70,000 per year and already struggling to get by.
Who Does Price Inflation Hurt the Most?
There is no question that higher price inflation hurts the poor the most. This includes people with a relatively low income. But it has become such a problem in the last few years that price inflation is having a significant impact on middle class America.
We live in a world where it just seems like almost everything is expensive. The cost of the average house or car is incredibly higher than it was. If you want to get someone in your house to fix something, it will likely cost you at least a hundred dollars just for someone to show up at your door.
I remember when I could get an oil change for under $20 a couple of decades ago. Maybe it wasn’t even that long ago. I doubt there are many places that would do that now.
I know the price of eggs and peanut butter have risen dramatically over the last several years. We get anchored to the new prices, but we shouldn’t forget what they were and what is being done to us. Our living standards have taken a hit because of these reckless monetary and spending policies.
Government makes our lives much more expensive by taxing and regulating. Of course, we shouldn’t forget the lockdown mania of 2020 either. Still, the root of this is monetary policy, which is there to enable massive deficit spending by Congress.
This is what happens when the Federal Reserve creates trillions of new dollars out of thin air. We are suffering the consequences of it now. Until it is widely understood that this is the core problem, we will continue to suffer under it.