If the word inflation doesn’t ring any bells in your head when I say it, it may mean you are fairly young and haven’t had a lot of experience with it or worse, you are getting older and you just have forgotten what it means. But if you still have any memory or senses in your head after months of crazy 2020, then you just might get a chill down your spine at the thought of another blow against your wallet: Inflation, 2021 style!
Inflation Over the Past 25 Years
If you haven’t noticed it, inflation hasn’t really been a thing for a pretty long time, at least when it’s compared to the 1970s and early ’80s. Over the past 20 years, the annual rate of inflation has been consistently about 2%, although sometimes a little higher (like when the great recession struck in 2008). It has been an almost predictable small number.
|Date||Annual Rate of Inflation|
(Over the previous year)
|July 1, 2020||0.99%|
|January 1, 2019||1.55%|
|January 1, 2018||2.07%|
|January 1, 2017||2.50%|
|January 1, 2016||1.37%|
|January 1, 2015||-0.09%|
|January 1, 2014||1.58%|
|January 1, 2013||1.59%|
|January 1, 2012||2.93%|
|January 1, 2011||1.63%|
|January 1, 2010||2.63%|
|January 1, 2009||0.03%|
|January 1, 2008||4.28%|
|January 1, 2007||2.08%|
|January 1, 2006||3.99%|
|January 1, 2005||2.97%|
|January 1, 2004||1.93%|
|January 1, 2003||2.60%|
|January 1, 2002||1.14%|
|January 1, 2001||3.73%|
|January 1, 2000||2.74%|
But having said that, I think things are about to change and change for the worse. Why? Here’s the reason.
The Pandemic and Its Effects
There have been many terrible results caused by the coronavirus pandemic including the deaths of over 1,000,000 people worldwide so far and the damage it has done to “normal” lives. Yes, it’s true that we are slowly trying to get our lives back and we could argue all day as to exactly how to do it and how fast to do it. But one of the results of the virus is the shutdown of the economy and that has obviously had a significant impact.
Business has suffered greatly with as many as 60% of some small businesses closing and many that will never reopen at all. Industries like restaurants and airlines and other travel businesses have greatly suffered, too.
Because of that, many commodities have been in short supply and we really haven’t noticed it too much because the demand for them has lessened as we have all curtailed our activities and need for them. While this isn’t true for things like hand sanitizer and paper towels, it is true for manufacturing and for the meat and grocery industry.
Meat prices spiked early on because of a bad situation at meat packing plants and now it is beginning to become entrenched in the industry as companies try to regain sales and profits due to losing so much over the past 6-8 months. That spells inflation. If any company has managed to survive all of this turmoil, you can bet that their number one priority will be to regain profits and that means pricing adjustments. Have you noticed any yet?
What I Stumbled Upon Just Today
As you may know, I am great believer in couponing and discounts. In fact, I get just about every restaurant dealio or coupon you can name sent to my email box every week and I try to take advantage of them when I can. Not going out to a restaurant every once in a while is a bit of a hardship, so now that it has become an option again here in NJ, I decided to see what is being offered. When I checked them and looked at the menu items I found…Shock Theater!
One of my favorites, Olive Garden, has upped its special deal menu pricing quite dramatically. The famous soup, salad, and breadstick lunches and dinners that have been priced at about $6.99 and $8.99 are now on the menu at $7.99 and $9.99 each. That’s an 11-15% increase since last February. Even the soft drink prices have increased about 7% each.
I found similar price increases on just about every item on their menu. The sad part is that I have seen similar price increases in most of the restaurant menus I have checked this week.
Coupons Aren’t Quite the Same
I have been noticing for months now the slow disappearance of “food item” coupons in ads and in mailers and online. The major bulk of what I am seeing regularly these days are for things like medicines, cleaning and washing supplies, and other non-food items rather than the “old faithfuls” I have seen for decades. There is a reason for it and I fear it’s related to the virus and its impact on profits.
A subtle change I also have observed is that there are more discounts on larger coupons for things like catering deals which by nature are highy profitable and have a larger built-in profit. Things like “save 15% on any $100 dollar package” may appeal to some, but for the average consumer like me, not so much. I’d rather have a “save 25 cents on a can of tuna” coupon any day.
I Know It’s Not Scientific, But I Feel It
I have been around long enough and run enough businesses to understand how it all works. While it’s true that refinancing your mortgage is going to save you money and getting a lower interest rate on a new car loan will too, it doesn’t always translate that way when a pandemic hits and the world’s economy closes for months on end. Unprecedented times, to say the least.
When the day comes for you to plan your next trip, by land, air, or sea, I’m afraid you will find dramatic price increases coming. That’s especially true right now as companies are cutting routes and workers and schedules to save money. However, they will still need to produce more revenue to continue to operate and you will be paying for it.
These few examples are just the tip of a very big inflation iceberg and no one is talking about it that I can see.
With all of the terrors of 2020, now comes inflation…do we really need that? You may have lost your job, your savings, your 401(k) plan, and even your apartment or home, and now this? And it also comes on the cusp of the demand for increased livable wages which was all the rage just before all this stuff hit. By the way, increasing wages will also cause a surge in inflation.
Have you seen indications of an increase in inflation coming? How will inflation affect you and your finances? Can you handle it or will you be facing just another problem and kick 2020’s misery down the road into 2021?