Domestic inflation increases to 5% amid supply chain issues
June 21, 2021
Concerns continue over inflation as prices for everything from used cars and trucks to computers, shoes and furniture are all on the increase. Earlier today we spoke with ASU economist Lee McPheters about inflation and its possible impact on Arizona.
McPheters began by describing what inflation exactly is, saying that it is a rise in the general price level across all consumer prices. He added that it’s usually measured by comparing the current consumer price levels to what they were one year ago, at that given time.
McPheters said that with the most recent release, it was a 5% increase in price level in reference to the prior year. “That 5% is about double what the federal reserve would like to see,” McPheters said. He added that such a jump in percent change has caused tension in economic spheres.
When asked what typically causes inflation, McPheters said that there are numerous reasons. Naturally, the prices of goods and services that companies provide will increase over time. Most frequently, wage increases can cause this.
“What’s happening right now is that the types of costs that businesses are seeing are really tied into supply chain issues,” McPheters said. “One that gets a particular focus here in Arizona in construction is lumber costs.”
McPheters explained that this can bring about a sort of domino effect, increasing the value of anything and everything that would make use of said lumber.
“Currently, the federal reserve is watching those numbers [inflation], and is intent on controlling inflation while recognizing that we’re in a recovery mode. We’re trying to turn this economy around.”
The ASU economist said that they’re viewing the current increase in prices as temporary. He said that he doesn’t expect a situation like what happened in the late 1970’s, in which inflation rates reached 7% or even double digits.
“What we’re going to see, I think, is a spike in inflation, maybe 3% for the year as a whole. But we’ll be back to 2.5% and I agree with the reserve that we’re dealing with a lot of transitory price changes.”