Inflation Down But Americans Are Still Spending A Lot On Repairs, Services
The annual inflation declined to 4.9% last month, according to the April Consumer Price Index report. This means that the things that Americans were struggling to buy last year are becoming a little more affordable now.
The cost of everyday essentials went up when the inflation rose to a record high of 9.1% in June 2022. This year, the Federal Reserve is raising rates by a smaller percentage compared to last year, which hints at easing inflation as per CNN. However, the prices are still very high of several goods and services.
According to a recent analysis by CarMD, a digital car diagnostic system, motor vehicle repair expenses have soared by 20% this year as more and more Americans are delaying buying new vehicles and driving their old ones. The report found that the increase in repair cost is not coming from labor costs which were down last year. The high repair cost is the result of people self-servicing their cars and the increased competition among the auto repair shops.
Day Care and Preschool
The cost of sending a child to daycare or preschool has seen a 7% hike compared to last year. This is also the largest annual increase recorded, according to April's CPI report. There is also an increased demand, as more parents are returning to work after the pandemic. Many of these centers were forced to shut down during the pandemic. The sudden surge in demand is resulting in price turmoil in this sector.
With an increase of 24% in its prices compared to last year, margine saw the biggest annual increase. Vegetable oil, which is a crucial ingredient in margarine, is in short supply. Argentina, the world's largest soybean-growing country, is experiencing a drought adding to the surge in the price of margarine.
Sectors Driving Inflation The Most
Food, gas, and housing prices have soared like never before, as reported by the Bureau of Labor Statistics. There had also been a 7.5% year-on-year, increase in gas prices and finally, we are getting to see a fall in the prices. Prices in grocery stores are also soaring, particularly for fruits, vegetables, and non-alcoholic beverages.
Long-Term Effects of Inflation
Mostly inflation is dreaded because it brings down the value of the currency and weakens the purchasing power of the American dollar and erodes savings. Feds controlling the interest rates can be a good thing but it's like walking on a tightrope as it is a risk of recession all the time. It's still very early to predict if we are heading towards a recession, but the good news is that the unemployment rate is stagnant at 3.6%, which is more or less similar to the numbers before the pandemic.