American consumers faced a year of record-setting inflation caused by supply chain shortages and increased government spending, bringing hardships for many American consumers.

Inflation in the United States has reached a forty-year record high.

The latest report from the Labor Department showed a 7.5 percent increase in prices from January of 2021 to January 2021, the most significant 12-month price increase seen since 1982. Among this increase in prices, American consumers saw a 40% increase in gas prices, bringing California’s average cost to $4.68 per gallon.

Including changes in gas prices, the energy index also increased by 27%, with costs for natural gas rising by 23.9% and the price for electricity rising by 10.7%. Consumers also saw a rise in food prices; the “food at home index” rose by 7.4%, with the costs of poultry, fish, and eggs increasing 12.2% and dairy products rising 3.1% from last year.

Many people claim that wages have gone up in the U.S., which is true; wages have increased by 4.7%.

However, this wage growth is overshadowed by the 7.5% increases in prices, causing real wages to decrease by 2.8%.

On the other hand, the Federal Reserve announced an increase in interest rates in March 2022. The reveal of the switch in monetary policy marks the first time the Fed has increased rates in three years.

The change in policy is not without consequence; increased interest rates usually come with a slowdown in economic growth.

What’s Causing Inflation?

Many factors are causing the rapid rise of inflation.

Typically, inflation is caused when consumers have money to spend and supply can’t keep up. Too much money chasing too few products.

Firstly, many consumers have increased savings due to government stimulus programs during the beginning and middle of the pandemic. This would usually be a good thing; however, coupled with shortages in many markets, prices are increasing.

These shortages are due to changes in the supply of materials or the labor shortage seen throughout the U.S.

For example, the semiconductor industry has seen a vast lack of materials used to make semiconductors, resulting in the price of new cars skyrocketing and, in some cases, stopping production. Other industries experiencing labor shortages have suffered from a drop in productivity, making it harder to produce the same number of products as they previously were.

The Effects of Inflation

Many people have felt the harmful effects of rapid inflation, both college students and people trying to provide for families.

“Things are getting expensive,” says Royce Garcia, a student at COS, “I have to pay more for things I didn’t [use] to.”

This wasn’t the only example of somebody struggling to deal with the price increases.

“I have a friend that can’t visit as much. It’s too expensive to drive here,” said another COS student, who requested that they remain anonymous.

People are starting to realize the costs of inflation will affect their everyday lives.

In addition, in an interview with Savemart manager Rick Cutler, the effects of inflation and supply shortages were made clear. “The cost of goods has shot up,” he states, “We have numerous price changes daily.”

However, Savemart isn’t to blame for these price increases.

The cost of supplies has increased across the country and, “Savemart still needs to make a profit,” he says.

Companies like Savemart and other grocery stores often run off razor-thin profit margins, making it necessary to go along with price increases.

Savemart is also facing another problem seen throughout the country, supply shortages.

When asked about shortages within the stores, Rick replied, “It’s random stuff like Caprisuns… Lunchables are hit and miss.”

The supply shortage could be attributed to many factors like the labor shortage or an influx of ships stuck on the coast of California.

The lack of staff makes it hard to keep the same productivity, “[Suppliers] are getting supplies but can’t make products,” says Cutler.

The price increases seen across the country are starting to take effect as more and more people realize that they’re paying much more for goods than before.

America’s economy is flailing, and consumers are paying the price.