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New York. NY – According to the Labor Department, a surge in the price of many goods and services has kicked off 2022 for American consumers. In fact, the inflation rate in the U.S. has seen its fastest annual increase in over 30 years.
As a result, prices have been going up in a number of segments of the economy, some dramatically exceeding the 2% inflation target the Federal Reserve orients its monetary policy around.
A rise in inflation can most certainly make paying off any outstanding debts more difficult. Inflation and debt are intrinsically linked. In addition to debt, here are a few areas where inflation will hit consumers the hardest:
Prices at the gas pump are more than $1 more than they were last year. A 50% year-over-year increase. Rising demand and constrained global economy is resulting in higher prices, and U.S. oil production has been slow to rebound from the pandemic.
Natural gas has seen a 28% increase for similar reasons that gasoline has. Supply is slow to rebound, and oil and natural gas production was also affected by Hurricane Ida in fall 2021. Homeowners may see an increase in heating bills, even up to 50% or more, this season.
Constrained supply of technology has decreased the production of millions of vehicles around the world. This shortage is also affecting the used vehicle market, which increased 26% in one year, as consumers turn to purchasing used vehicles in the meantime. Rental car costs have also increased by nearly 40%.
Increased transportation and fuel costs are affecting a number of industries, including meat production. Labor availability also remains an issue, and while inflation is high in general for this category (+15%), particular products such as uncooked beef and bacon have reached double digit inflation over the past 12 months.
A massive increase in lumber prices and other raw materials throughout 2020 and 2021 is still impacting the cost of furniture and betting. Plus, challengings with shipping due to global supply chain issues has also led to the 12% increase.
Other categories seeing an increase include:
Consumers are also finding that inflation is having a positive impact on debt. Wages are steadily increasing as Americans demand higher salaries and better working conditions, so many are benefiting from an increased income.
Depending on what kind of debt you have, you stand to reduce the actual value of your debt while the lenders who are concerned about inflation actually incur losses. Plus, the value of your asset (like real estate) is likely to increase alongside inflation, yet your interest rate won’t increase.
Those with credit card debt now have more purchasing power, so they can pay it back when it’s worth less – getting more money out of what they borrowed than lenders will when they are paid back.
It’s estimated that inflation will continue to increase over the next few months, and a recent survey reports 88% of Americans say they are concerned. However, many plan to cut back spending by:
