GRAND RAPIDS, Mich. — If you had to pick a headline for the release of this month’s Consumer Price Index, it would be a simple one: stuff costs more.
But not just more – the price of goods in the U.S. hit a high we haven’t seen in almost four decades. The rate of U.S. inflation topped 8% in March for the first time since 1981, when Ronal Reagan was president. The figure was actually one-tenth a percentage point higher than what was predicted by Dow Jones.
The CPI tracks the cost of many goods Americans can’t live without, from food and clothing to fuel and housing. Those things, on average, cost 8.5% higher this March compared to 12-months ago, and it all has to do with fuel.
“When you look at it, about 70% of the one-month jump is due to energy prices and overall, about 60% is actually due to rising gas prices alone,” said Heather Boushey, a member of the White House Council of Economic Advisors. “The president and everyone here are very concerned about what high prices mean for families all across America.”
Because of the ongoing war in Ukraine, fuel prices climbed sharply last month. Prices at the pump reached a peak of $4.33 a gallon on March 11th. Since then, they’ve rolled downhill to an average of $4.10 on Tuesday, the same day the report was released. Also on Tuesday, President Joe Biden announced a suspension of a summertime ban on sales of higher ethanol gas blends. Biden also announced the U.S. will be utilizing 180-million barrels of oil from the nation’s Strategic Petroleum Reserve, bringing the number of barrels in the reserve down from 564.6 million, to 384.6 million barrels, a 40-year low for the reserve.
The White House has high hopes those two moves will lead to further drops in fuel prices.
Local markets certainly hope that’s the case. Alan Hartline, owner of Kingma’s Market in Grand Rapids, has been widening margins so Kingma’s doesn’t have to pass that added cost on to customers – they’re getting pretty good at it. The longer of a journey a product has to make to a shelf, the more it costs, so Hartline says there’s something to be said for buying local, even more so than usual.
“The stuff that we get is in Byron Center and Ada,” he said. “It’s really that local partnership that we have with folks to say, ‘what can we do together to kind of hold off some of the cost’ or think smarter about the business that’ll allow us to work our way through it.”
“I think we’re blessed to have the flexibility of a small organization where we can be pretty nimble and opportunistic on different deals that are there,” he continued.
But the story is different for big-box retailers like Meijer and Wal-Mart, who Hartline says can get their produce from halfway across the country. It’s that effort to get it there that costs more, for them and for you.
“We’re not having to pay all these increased fuel surcharges,” he said. “It’s just a tax on top of the cost.”
The other story for workers is that inflation is far outpacing real wages – people are spending more than they’re making. Where the CPI rose 8.5% year-over-year, earnings increased only 5.6% from last March. For their part, the Federal Reserve is planning to keep raising interest rates through the remainder of the year and into 2023. The last time prices were this high, the Fed raised interest rates to near 20%, which lowered inflation but triggered a recession.