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A lot of economists are blaming the third stimulus check already the arrival of the payments of the child tax credit being responsible that prices are rising.
From the 12 March 2020, date the first stimulus checks were issued, The Internal Revenue Service (IRS) has sent more than more than $ 200, 000 million dollars in stimulus payments that have been distributed among US consumers.
Since June the Consumer Price Index, which is the indicator in charge of measuring fluctuations in prices, has increased by 3.4% compared to a year ago. This is the highest year-on-year increase in recent 13 years , no However, many economists who follow these fluctuations are not concerned because the prices of many goods reached in 2020 its lowest levels in many years.
How is the pandemic affecting the price level?
The coronavirus generated an almost immediate impact on consumer spending that when they started working from home saw a the need to buy new computer equipment and office furniture to work more comfortably.
Because the children and students stayed at home their parents spent more on educational materials and equipment so that they could continue the classes.
Those changes in consumer preferences caused a change in the supply chain of products , shortage in some products such as toilet paper or disinfectant wipes , in addition to historical increases in the prices of some products.
The price of the gas
Gasoline is one of the products that has been most affected during the coronavirus pandemic. At the beginning of the confinement, many consumers were happy for the drop in its price because most of the workers stopped going to work and worked from home.
However, as consumer stocks began to return to pre-pandemic levels, the impact on supply chains ended up being more difficult or simply broke .
In the case of gasoline several of the refineries in the United States that process the fuel had to close due to the fall in their price and low demand for fuel . However, when the economy reopened and the number of people vaccinated increased, people began to return to their jobs already traveling before the arrival of summer and the price of gasoline increased .
However, the industry’s ability to refine oil and transform it into gasoline and distribute it decreased creating a shortage in the supply of fuel .
Related: April records the highest price increase in supermarkets for the past 45 years in the United States
High demand, low supply
One of the reasons for price increase is that many sectors are related to the increase in the price of gasoline. The companies that transport their products from the place of manufacture to the stores have an impact on the increase in transport costs for the consumer.
Highest prices
The Bureau of Labor Statistics released the Consumer Price Index for June, which showed an average increase of 0.9% over May levels and an increase of 6.1% from June of 2020 .
The sectors with the largest increases in prices are fuels such as gasoline that increased by more than one 45% compared to June . However, the price of electricity and gas used at home has only risen 6.5%.
The used car market has also risen has experienced a price increase which has led consumers to pay a 45% percent more due to product chain breaks.
The surge in demand for used cars came after the auto industry suffered a break in the supply chain due to manufacturers having problems with the distribution of microchips used by new vehicles that due to the restrictions and increase in cases of coronavirus, companies have been reporting a shortage in the number of chips.
This situation has reduced the supply of cars butis causing used car prices to spike.
The price increase is temporary
The president of the Federal Reserve (Fed), Jerome Powell, has mentioned that the economy is experiencing a rise in prices arguing that the effect will be transitory until supply chains are restored and consumer demand for spending decreases .
During his speech before the Congress Powell clarified that during the process of economic recovery in the United States the Fed will raise interest rates in 2023 to curb the phenomenon of inflation .
However, price increases, even temporary, can be detrimental to low-income households . When the interest rate is high, it means that the price of the borrowed money is higher.
Banks offer higher interest rates to encourage consumers not to spend their money and instead deposit it in savings accounts . With this money the banks invest it and make a profit.
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