The red flag has been raised and the bad news is right in front of us. The fact is that prices are a big issue and are going up! That means it’s time to shop smart or you’ll be paying through the nose.
If you thought the past 12 months were rough on your wallet, then get ready to shell out even more for your favorite and necessary things in 2022. You can thank in(pan)flation, rising wages, shipping wars, labor shortages, and climate change for those and probably a few more reasons that some may not want to say out loud as to why.
One of those reasons may be extreme profiteering by businesses to try to recoup their big losses of 2020 and 2021 caused by the pandemic. All told, unless you shop smart, you can count on the fact that everything will cost you more in 2022!
The Bigger Picture
I may be retired (but not bored) as I am on the homeowners “board” (HOA) where I live!
As a sitting elected member on my HOA Board, I get to see and deal with many expenses in our community. I am seeing alarming trends for 2022 and beyond. One example is the renewal of our insurance policies which run for three years and are put up for bid. This year, the bids came in at 12-17% higher than they are presently (the same is true on landscaping and repair contracts, as their renewal prices are soaring for no apparent reason).
We have had no claims filed in the present contract, so why would renewals be so high? The answer may be profiteering.
During the auto driving decline, insurance companies have given back some monies to some customers and in more cases lost customers who just couldn’t afford to pay premiums. That extends over into other types of insurances.
Some companies paid claims that may be related to COVID-19 and that has driven up their costs. But then there’s this reason: They can get away with it if they all do it and that seems to be what I am seeing.
The Good, the Bad, and the Ugly
It can’t be all bad news, can it? It’s not. The supply problems are easing a bit and sometime in 2022 they should stop affecting everything the way it has been for the past year. That’s good news. Steps taken by the federal government to get the process to speed up are working slowly, but are working.
The raw materials needed to make the things we want and need are not, however, in good supply. There are many reasons, but climate is certainly one of them and that isn’t getting any better. We have been talking about making the necessary changes for over 50 years now and what have we really accomplished? The even scarier part is that if we started all that we need to do today, it would take another 50 years now for it to have any real affect. Perhaps this should move into the ugly column?
Ugly certainly applies to those who are raising prices for goods and services simply because they can and want to make extra money right now. Demand is high and people are buying in a frenzy despite the prices. That’s what is happening whether you are doing it or not. It’s a fact that retail sales accelerated in October 2021 faster than at any time since the 1990’s according to the Commerce Department. This is despite the fact that the pandemic has millions out of work and wishing and hoping that things will all be “normal” again soon.
Saving Money Means Being a Smarter Shopper
To shop smart requires an effort. You can read hundreds of ways I suggest in my posts that deal with developing those skills. 2022 would be the year to get really good at it and when I say that, I mean you must!
But sometimes I feel like I am walking forward into a hurricane. That’s because I write about ways to save money and I don’t get that message to connect. If you don’t need to save, then I get it. That means you are in rare air. But the rest of us do it for real reasons including financial security and building our retirement funds. If you aren’t in that group, then you should be reading a blog about exotic vacations around the world and other places where you can spend your money without thinking about savings.
Get Ready Because These Prices Are Going Up in 2022!
Grocery prices continue to climb, with an average price increase of over 5% over last year. But that’s not the whole story. Certain types of food are showing more significant increases. Take bacon, for example. The average price is now just over $7 for a pound, more than a 25% increase over its $5.56 price a year ago. But it’s not the only protein that costs more. Steak and eggs are both seeing dramatic increases of nearly 20% or even more.
Meat prices started rising early in the pandemic when COVID outbreaks forced the closure of several plants. Drought has made the price of cattle feed skyrocket. And lack of competition in the industry (just four companies handle most of America’s meat processing) has enabled prices to remain very high.
Both Coca-Cola and PepsiCo have announced price increases thanks to supply-chain and labor issues. In addition to their sodas, both brands also sell popular juices, teas, and waters. Coffee prices are surging, too, thanks to climate and drought and frosts in Brazil, the world’s largest producer of coffee. Bottom line here is expect that inflation will remain high for the next year in food and food services.
Rather make reservations than make dinner? Don’t expect it to be any cheaper when you do.
Restaurant prices have headed up, too, with prices 4.7% higher than a year ago on average, and 6.9% higher at “fast food” eateries. Restaurants are feeling the same squeeze on food prices as consumers, thanks to challenges with shipping and raw materials.
Starbucks has reported difficulty sourcing numerous menu items ranging from flavored syrups to chai tea bags. In addition, labor conditions have forced the industry to raise wages. Many restaurants also have new expenses that weren’t on the menu pre-pandemic, like stocking personal protective equipment, working with third-party delivery services, and maintaining outdoor dining spaces. With winter here now, it may be difficult to lure diners indoors, since restaurants remain one of the top places you’re likely to catch coronavirus.
Cars depend on microchips (semiconductors) for dozens of advanced functions. Ford, General Motors, and other manufacturers will roll out 1.5 million to 5 million fewer vehicles this year, and those that are available will cost 7.6% more than they did at this time a year ago.
With more limited inventory, the usual tactics for scoring a deal like shopping at the end of a month or quarter when the sales staff are trying to meet quotas won’t be effective in 2022 and that will drive prices even higher.
What about used cars? People will pay more if they need a car. If you think a great used car is the next best option, think again. The price of previously owned vehicles has surged by 31.9% in 2021, according to the Consumer Price Index (CPI). The good news is that car prices are starting to rise by smaller amounts. Inventories might start being replenished later in 2022, but the shortage will be felt through most of 2022, at least.
According to the CPI, gas prices rose 42.7% over the past year, with several contributing factors. Early in the pandemic, many of the countries that produce crude oil—which in turn is used to make gasoline—curtailed their production when lockdowns prevented travel. Then the prices started going back up again as people started taking road trips because it felt like a safe way to travel. But oil producers were caught off guard with the demand and raised prices to compensate for low supply.
While weather may not make production a problem for the moment, production is slowly increasing. But oil-rich countries are wary of resuming pre-pandemic levels only to weather another sudden collapse in demand. Now that new COVID-19 strains are rising, don’t expect that production will resume to old levels at least through 2022.
If you’re reading this in your yoga pants and sweatshirt, you might be surprised to learn that clothing prices are up 4.2% over last August. One factor: rising cotton prices, due in part to former President Trump’s trade policies with China, which President Biden has largely kept in place. Retail workers, too, are demanding higher wages in today’s new reality. And since loungewear and athleisure are the new must-haves, their prices have risen accordingly.
There has been some pent-up demand for going-out clothing, as well, so the price of dresses has increased 11.9%, while men are paying 4.7% more for suits and sports coats. Likewise, after a year of growth spurts, children who returned to school this fall needed new clothing, and prices grew with them (1.4% for boys and 2.8% for girls). That is a trend that will continue in 2022.
If you rent, you can be almost positive that your monthly payments will be going up upon renewal. Landlords are getting whacked with all sorts of costs to maintain property and provide services and that means tenants will wind up paying. Condo owners like me can expect HOA fees to increase too and when I say increase I mean jump to reflect the inflation rate.
Homebuyers face difficulties, too. While mortgage rates may still be super low, housing prices remain sky high. The story behind the housing crunch is that prices were 18.1% higher in August compared to a year ago and still climbing. Material shortages and labor conditions led to low inventory of available homes for sale. Other factors, like zoning restrictions in many municipalities that limit where builders can develop homes, have curtailed supply. In addition, many people who might otherwise be interested in selling have been reluctant to have strangers traipsing through their homes in the middle of a pandemic. The rate of inflation in housing may start to level off by the end of 2022, but who knows.
Food, clothing, and shelter…is there anything to worry about in 2022? If you are like me, you are worried.
Can you do anything about it? Yes, you can. There are just three ways to fight inflation. One is to earn more so the pain is lessened. Two is the tough one, spend less and shop smart. Now you need to be more careful about spending than ever. Three is to make your purchases count with needs and limit those wants. Wants can wait. Use your common sense and shopping tips like you’ll find here to combat the situation. Doing all three is the best solution to fighting inflation.
If you’re able to find (and afford) the products you and your family need in 2021, don’t expect supply and pricing issues to settle back down in the new year ahead to old ways and prices. There are widespread feelings that a lot of these challenges are going to persist well into next year and controversy on whether it will be even OK by 2023.
It’s not all bad news, though. Some positive changes have occurred as a result of the pandemic, like the availability of online shopping. But here’s my warning for 2022: Don’t take it lightly.
Where do you stand on spending and inflation right now? Are you feeling it or are you prospering? What does your budget look like for 2022? Are you ready to shop smart?