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The Consumer Price Index Rose 0.4% in February, Seasonally Adjusted, and Rose 3.2% Annually

The Consumer Price Index Rose 0.4% in February, Seasonally Adjusted, and Rose 3.2% Annually

The February 2024 Consumer Price Index of All Urban Consumers (CPI-U) report indicates that inflation rose by 0.4% for the month, exceeding the level of price acceleration seen in January (+0.3%) as well as December 2023 (+0.3%). These data were released at 8:30 am EST on Tuesday, March 12, 2024, by the Bureau of Labor Statistics. Before seasonal adjustment, the year-over-year (Y-o-Y) inflation rate in the all-items index grew by 3.2%, marking a small yet notable acceleration from January’s 3.1% CPI reading, yet declining from December’s hotter 3.4% reading.

According to the Financial Times, this month’s CPI increase was unexpected by economists—data that will surely be scrutinized by the U.S. Federal Reserve during their upcoming FOMC meeting. Heading into Tuesday, the consensus among analysts and market watchers was that inflation would likely remain the same on a Y-o-Y level at 3.1%. After today’s news, it stands to reason that the Federal Reserve may delay their expected interest rate cuts further into 2024 than expected.

Today, the Federal Reserve’s federal funds rate sits at 5.25 to 5.5%, a 22-year high, and borrowers and investors alike have been waiting with anticipation for nearly a year for inflation to come under control. January’s inflation report may have dashed any hopes for interest rate relief before Q3 2024.

Global markets, however, responded positively to this month’s inflation report. At the time of writing, European markets (represented by the Stoxx 600 index) traded 0.5% higher on Tuesday morning, with financial services and travel stocks leading the charge. As of mid-day Tuesday, the Dow Jones Industrial Average (+214 points) and the S&P 500 (+45.56) were both trading in the green.

Driving inflation this month was a high shelter index and rising gasoline prices. Together, these two price categories contributed to over +60% of this month’s price acceleration. Regarding “core” inflation (e.g., all items less food and energy), the index rose +0.4%, the same rate at which it accelerated in the previous month. These data indicate that fighting “last mile” inflation may be much more difficult than market watchers would have expected.

A chart depicting February 2024's US inflation data.

Source: Bureau of Labor Statistics

Food Prices

The food index remained unchanged in February, as did the food at home index, both of which matched the level of acceleration seen in January (+0.4%) on a month-over-month basis. Notably, three of the six primary grocery indices decelerated in February, including the following:

  • Dairy and related products: (-0.6%)
  • Cheese and related products (-1.1%)
  • Fruits and vegetables (-0.2%)
  • Nonalcoholic beverages index (-0.2%)

On the other hand, price acceleration was seen in various price categories, including the index for full-service meals (+0.1%), food at home (+2.3% Y-o-Y), food away from home (+4.5% Y-o-Y), and cereals and bakery items (+1.7% Y-o-Y).

Energy Prices

Regarding energy prices, the energy index rose +2.3% in February, marking a major increase over January’s +0.9% rise. The price acceleration in this category was driven largely by higher gasoline prices, which increased +3.8% in February. The natural gas index rose +2.3% on the month while electricity prices rose +0.3%. Meanwhile, the fuel oil index rose +1.1%.

Core February 2024 CPI

The core CPI data for February 2024 the index rose +0.4% month-over-month, accelerating by the same margin as it did in January. On a Y-o-Y basis, the core CPI index rose +3.8%. Below is an itemized breakdown of the main price fluctuations seen in January’s core CPI reading:

  • Shelter index: (+0.4%) [January: +0.6%]
  • Rent index: (+0.5%) [January +0.4%]
  • Owners’ equivalent rent: (+0.4%)
  • Motor vehicle insurance: (+0.9%) [January: +1.4%]
  • Medical care index: (+0.5%) [January: +0.5%]
  • Airline fares: (+3.6%) [January: +1.4%]
  • Hospital services: (-0.6%)
  • Physician services: (-0.2%)

 

A chart depicting February 2024's US inflation data.

Source: Bureau of Labor Statistics

Seasonally Unadjusted CPI Data for February 2024

Before seasonal adjustments, the CPI-U for February 2024 increased (+3.2%) year-over-year, rising to an index level of 310.326. Since these figures are unadjusted, they include regular seasonal price fluctuations that generally occur by the same margins every year.

A line chart depicting February 2024's US inflation data.

Source: Bureau of Labor Statistics

Inflation’s Grip Tightens: Gold Glitters Amid Uncertainty

As inflation continues its upward trajectory, reaching 3.2% in February 2024, up slightly from 3.1% in January, the prospect of imminent interest rate cuts by the Federal Reserve dims. Analysts now look toward the summer months, speculating on the potential for monetary policy adjustments, albeit with caution.

The economic strain is palpable across American households. Inflationary pressures have eroded the financial resilience of families, with healthcare expenses notably on the rise. Despite a buoyant job market, the American populace remains encumbered by the inflationary weight, with a significant majority labeling the economic situation as dire.

Amidst this financial turbulence, certain assets shine as beacons of stability. Last week, gold bullion reached an all-time high of $2,160 per troy ounce, solidifying its status as a safe-haven asset while markets are in disarray. Cryptocurrencies like Bitcoin and Ethereum have also seen a resurgence, bolstered by the introduction of eagerly awaited ETFs, with the former also setting a price record earlier this month above $70,000 per token.

Gold and silver, time-honored bulwarks against inflation, may present a golden opportunity for investors to shield their wealth from currency devaluation and safeguard their retirement savings from the eroding power of the dollar.

Thinking about diversifying into precious metals? Talk to your financial advisor about initiating a gold IRA account today, allowing you to invest in this red-hot asset on a tax-advantaged basis. Additionally, our complimentary CPI inflation calculator remains at your disposal, enabling you to assess inflation’s impact on your finances. Remember, seek the guidance of a financial advisor before making any investment decision.

The Consumer Price Index Rose 0.3% in January, Seasonally Adjusted, and Rose 3.1% Annually

The Consumer Price Index Rose 0.3% in January, Seasonally Adjusted, and Rose 3.1% Annually

The January 2024 Consumer Price Index of All Urban Consumers (CPI-U) report indicates that inflation rose by 0.3% for the month, matching the same level of price acceleration seen in December and rising sharply from November’s more modest increase (+0.1%). These data were released at 8:30 am EST on Tuesday, February 13, 2024, by the Bureau of Labor Statistics. Before seasonal adjustment, the year-over-year (Y-o-Y) inflation rate in the all-items index grew by 3.1%, marking a notable deceleration from December’s 3.4% CPI reading.

This month’s CPI read came in hotter than expected. According to Barron’s, the economic consensus in advance of Tuesday’s CPI report forecasted a Y-o-Y price growth of 2.9%. Now that we have seen two consecutive months exceed forecasted inflation, market watchers are right to question whether this will delay any interest rate cuts by Q2 2024. With today’s news, any potential rate cuts are likely to be delayed given that last month’s inflation spike appears not to be an anomaly.

The current Fed interest rate sits at 5.5%, a 22-year high, and borrowers and investors alike are hotly anticipating interest rate relief as inflation comes under control. However, this month’s CPI report suggests that relief may be further away than originally thought.

Reactions were universally negative in the stock market in response to today’s inflation news. As of noon EST, the Dow Jones Industrial Average was down more than 400 points. European markets also closed in the red.

This month’s inflation rise was fueled in large part by rising food and housing prices, as has been the case over the previous two months. Food and energy costs tend to be volatile relative to other consumer goods. Excluding these items from the CPI, core prices rose only 0.4% month-over-month, up from December’s 0.3% increase.

Unlike last month, core CPI prices rose in January, casting even greater doubt on whether the Fed’s target inflation rate of 2% is attainable in the foreseeable future. Both headline and core inflation remain higher than both the Fed and everyday Americans would like, suggesting that the “last mile” of fighting inflation will likely be more difficult than anticipated.

A chart depicting January 2024's US inflation data.

Source: Bureau of Labor Statistics

Food Prices

The food index rose by 0.4 percent in December, increasing by twice the margin seen in December (+0.2%). The index for food at home rose by 0.4 percent, also up considerably from December. Food away from home fared worse, up 0.5 percent on the month. Notably, the index for meats, poultry, eggs, and fish was unchanged from December, while nonalcoholic beverages rose by 1.2 percent. On a Y-o-Y basis, the food at home index rose by 1.2 percent, slightly down from December (1.3%), and the food away from home index rose by 5.1 percent on the year.

Energy Prices

Lower energy costs were the main price category that pulled inflation down in December. The energy index fell 0.9 percent in January following a modest acceleration in the previous month, continuing a downtrend seen since October but interrupted last month due to base year effects. The natural gas index plummeted 17.8 percent over the year, and the energy index as a whole fell by 4.6 percent Y-o-Y. Fortunately for consumers, the gasoline index dropped by 6.4 percent Y-o-Y, and the fuel oil index dropped 14.2 percent.

Core January 2024 CPI

Regarding the core CPI data for January 2024 (i.e., inflation less food and energy), the index rose 0.4 percent month-over-month, accelerating over the 0.3 percent margin seen in both December and November. However, the index rose by 3.9 percent on a Y-o-Y basis, matching December’s gain. Below is an itemized breakdown of the main price fluctuations seen in January’s core CPI reading:

  • Shelter index: (+0.6%) [December: +0.5%]
  • Rent index: (+0.4%) [December: +0.4%]
  • Owners’ equivalent rent: (+0.6%)
  • Motor vehicle insurance: (+1.4%) [December: +1.5%]
  • Medical care index: (+0.5%) [December: +0.6%]
  • Used cars and trucks: (-3.4%) [December: +0.5%]
  • Apparel: (-0.7%)
  • Hospital services: (+1.6%)

 

A chart depicting January 2024's US inflation data.

Source: Bureau of Labor Statistics

Seasonally Unadjusted CPI Data for January 2024

Before seasonal adjustments, the CPI-U for January 2023 increased (+3.1%) year-over-year, rising to an index level of 308.417. Since these figures are unadjusted, they include regular seasonal price fluctuations that generally occur by the same margins every year.

A chart depicting January 2024's US inflation data.

Source: Bureau of Labor Statistics

While Inflation Holds Strong, So Too Does Gold

While the pundit class decries the difficulties of “last mile” inflation, there is little indication that the Fed’s target rate of 2% is achievable within the first half of 2024. An increasing chorus of economists are now looking to the summer as the most likely time frame for any potential rate cut, if that.

Meanwhile, American households are suffering. High inflation has significantly reduced the purchasing power of American families over the past two years, with rising healthcare costs leading the way. Despite strong job growth, Americans aren’t feeling any relief. The long-lasting effects of inflation have left a lasting mark on everyday consumers, with about 75% of Americans describing the economy as “poor”.

The silver lining is that there are well-performing assets that may provide relief for American investors. In December, the spot price of gold broke its all-time high, hitting $2,135 per ounce before stabilizing around the $2,000 mark. Bitcoin and Ethereum, riding on the launch of widely-anticipated cryptocurrency ETFs, have also rallied in double digits over the past few months and are currently trading at multi-year highs.

Previous recessions and market shocks have shown that gold and silver can outperform traditional securities when financial markets decline. For many investors, gold acts as a reliable hedge against inflation, offering a stable store of value when others are not. Investing in gold and silver can serve as a protective measure for your savings against the devaluation of the U.S. dollar, allowing you to preserve your wealth during times of inflation.

Thinking about diversifying your portfolio with gold or silver? You can take the first step by opening an account with one of the top-rated gold IRA service providers. In the meantime, you can use our complimentary CPI inflation calculator tool to monitor how inflation is impacting your household’s bottom line. As always, consult with a financial advisor before investing in any asset.

The Consumer Price Index Rose 0.3% in December, Seasonally Adjusted, and Rose 3.4% Annually

The Consumer Price Index Rose 0.3% in December, Seasonally Adjusted, and Rose 3.4% Annually

The December 2023 Consumer Price Index of All Urban Consumers (CPI-U) report indicates that inflation rose by 0.3% for the month, following a more moderate rise of 0.1% in November and remaining unchanged in October. These data were released at 8:30 am EST on Thursday, January 11, 2024, by the Bureau of Labor Statistics. Before seasonal adjustment, the year-over-year (Y-o-Y) inflation rate in the all-items index grew by 3.4%, marking a notable acceleration from previous months.

This month’s CPI read exceeded expectations. Economists anticipated a rise of 0.2% month-over-month and a 3.2% Y-o-Y increase. Given December’s hotter-than-expected inflation data, market watchers are right to question whether this will delay the Fed’s dovish pivot slated for later this year. The current Fed interest rate sits at 5.5%, a 22-year high, and borrowers and investors alike are hotly anticipating interest rate relief as inflation comes under control. However, this month’s CPI report suggests that relief may be further away than originally thought.

Reactions were mostly negative in the stock market in response to today’s inflation news. As of 9:45 am EST, the Dow Jones Industrial Average was down 26.49 points.

According to the Associated Press, this month’s inflation rise was fueled in large part by rising food and housing prices. Food and energy costs tend to be volatile relative to other consumer goods. Excluding these items from the CPI, core prices rose only 0.3% month-over-month, unchanged from November’s increase. The upside is that, on a Y-o-Y basis, core prices rose by just 3.9%, which is the softest increase in core consumer prices since May 2021 and a notable decline from the previous month’s 4% Y-o-Y gain.

Despite positive news regarding core CPI prices, this month’s report nonetheless casts doubt on whether the Fed’s target inflation rate of 2% is attainable in the near term. Headline inflation remains considerably higher than both the Fed and everyday consumers would like.

A chart depicting December 2023's CPI inflation data.

Source: Bureau of Labor Statistics

Food Prices

The food index rose by 0.2 percent in December, increasing at the same rate seen in November. The index for food at home rose by 0.1 percent, which is also consistent with the previous month’s increase. Food away from home fared worse, with a 5.2 percent increase on the year. Notably, the index for meats, poultry, eggs, and fish increased by 0.5 percent due largely to a strong 8.9 percent increase in the egg index. This marks a major acceleration from November’s decrease in the same index by 0.2 percent. On a Y-o-Y basis, the food at home index rose by 1.3 percent, which marks a decline from November’s 1.7 percent acceleration on a 12-month basis.

Energy Prices

Lower energy costs were the main price category that pulled inflation down in December. The energy index rose 0.4 percent in December following a 2.3 percent decrease in the previous month and an even larger 2.5 percent decrease in October. The natural gas index fell by 0.4 percent over the month, coming on the heels of a sizable 2.8 percent increase in November. Similarly, the fuel oil index fell by 5.5 percent in this month’s report. On the year, the natural gas index fell by 13.8 percent, the gasoline index fell by 1.9 percent, and the fuel oil index fell by 14.7 percent. On the other hand, the index for electricity saw a 3.3 percent increase.

Core December 2023 CPI

Regarding the core CPI data for December 2023 (i.e., inflation less food and energy), the index rose 0.3 percent month-over-month, rising by the same margin seen in November. However, the index rose by 3.9 percent on a Y-o-Y basis, down slightly from November’s 4.0 percent decline. Below is an itemized breakdown of the main price fluctuations seen in December’s core CPI reading:

  • Shelter index: (+0.5%) [November: +0.4%]
  • Rent index: (+0.4%) [November: +0.5%]
  • Personal care items: (-0.3%)
  • Lodging away from home: (+0.4%)
  • Motor vehicle insurance: (+1.5%) [November: +1.0%]
  • Medical care index: (+0.6%) [Unchanged from November]
  • Used cars and trucks: (+0.5%) [November: +1.6%]
  • Household furnishings and operations: (-0.4%) [Unchanged from November]

 

A bar graphc depicting month over month inflation data in 2023.

Source: Bureau of Labor Statistics

Seasonally Unadjusted CPI Data for December 2023

Before seasonal adjustments, the CPI-U for December 2023 increased (+3.4%) year-over-year, rising to an index level of 306.746. Since these figures are unadjusted, they include regular seasonal price fluctuations that generally occur by the same margins every year.

A dual line graph depicting inflation data in 2023

Source: Bureau of Labor Statistics

While Stubborn Inflation Rings in the New Year, Gold Soars

Supply-side constraints, fueled in large part by disruptions and violence in the Red Sea, have stoked inflationary flames. While the pundit class decries the difficulties of “last mile” inflation, there is little indication that the Fed’s target rate of 2% is achievable within H1 2024. An increasing chorus of economists are now looking to the summer as the most likely time frame for any potential rate cut.

In the meantime, American households are suffering. High inflation has significantly reduced the purchasing power of American families over the past two years, with rising healthcare costs leading the way. Despite strong job growth, Americans aren’t feeling any relief. The long-lasting effects of inflation have left a lasting mark on everyday consumers, with about 75% of Americans describing the economy as “poor”.

The truth is that the word “poor” is a gross understatement. Behind the cheery backdrop of high spending and GDP growth is a grimmer reality: Americans have record levels of debt, increasingly unaffordable housing, sky-high borrowing costs, and stagnant wages that aren’t keeping up with the cost of essential goods.

The upside, however, is that there are well-performing assets that may provide relief for American investors. In December, the spot price of gold broke its all-time high, hitting $2,135 per ounce before stabilizing around $2,050. Bitcoin and Ethereum, riding on the launch of widely-anticipated cryptocurrency ETFs, have also rallied in double digits over the past few months.

The recessions of 2008 and 2020 have shown that gold and silver can outperform traditional securities when financial markets are in decline. For many investors, gold acts as a reliable hedge against inflation, offering a stable store of value when others are not. Investing in gold and silver can serve as a protective measure for your savings against the devaluation of the U.S. dollar, allowing you to preserve your wealth during times of inflation.

Considering diversifying your portfolio with gold or silver? You can take the first step by opening an account with one of the top-rated gold IRA service providers. In the meantime, you can use our complimentary CPI inflation calculator tool to monitor how inflation is affecting your household’s finances. Always consult with a financial advisor before making any investment decision.

The Consumer Price Index Rose 0.1% in November, Seasonally Adjusted, and Rose 3.1% Annually

The Consumer Price Index Rose 0.1% in November, Seasonally Adjusted, and Rose 3.1% Annually

There’s much speculation about when or if the Federal Reserve will start cutting interest rates, with many analysts suggesting May 2024 as a potential target timeframe. The key determining factor is whether inflation can come under control before we get there.

Markets reacted positively to today’s inflation news, which suggests that rate cuts may be coming sooner than we think.

Both the NASDAQ 100 Futures and Dow Jones Futures indices were in the green (+0.07%) upon the release of soft inflation data for November. While inflation rates rose slightly month-over-month, this was generally expected among most market watchers.

The November 2023 report of the Consumer Price Index of All Urban Consumers (CPI-U) indicates that inflation rose by 0.1%, following an unchanged month in October and a 0.4% increase in September. These data were released at 8:30 am EST on Tuesday, December 12, by the Bureau of Labor Statistics. Before seasonal adjustment, the year-over-year (Y-o-Y) inflation rate in the all-items index grew by 3.1%, marking a slight deceleration from October 2023’s CPI report.

According to a CNBC report, prices edged higher across the board in November, although within the expected range (3.0-3.2%) that most analysts forecasted. Now, all eyes are pointed at Chairman Powell’s Federal Open Market Committee (FOMC) meeting later this week, where he could divulge more information about Americans might see some interest rate relief.

Keeping inflation in check were energy prices, which fell by 2.3 percent in November with gasoline dipping by 6 percent. At the same time, shelter prices were the main drivers of inflation, up 6.5 percent on a 12-month basis. Core CPI also increased by 0.3 percent, an increase from 0.0 during the month prior. On the whole, the November 2023 CPI report was warmly received by most investors and market watchers, as it may be a sign of dovish interest rate policies to come from the Fed.

A chart depicting the US CPI numbers over time

Source: Bureau of Labor Statistics

November’s monthly CPI figure marks an acceleration from October’s (0.0%) month-over-month figure, yet a sharp deceleration from September’s (0.4%).

Food Prices

The food index rose by 0.2 percent in November, a decrease from 0.3 percent during the previous month. Four of the six principal categories in the grocery store food group index rose in price in November, including strong 0.5 percent rises in the nonalcoholic beverages and cereals and bakery items indices. On the other hand, meats, poultry, eggs, and fish decreased in price by 0.2 percent. Across the board, the food at home index increased by 1.7 percent on a 12-month basis.

Energy Prices

Thanks to gasoline prices at an 11-month low, the energy index fared well in November 2023. The index dropped by 2.3 percent following an even larger 2.5 percent decrease in October. As stated, gas prices led the charge with an excellent 6.0 percent price decline (a decline of 7.3 percent before seasonal adjustments). On an annual basis, the energy index fell by 5.4 percent with mixed components, with the electricity index rising by 3.4 percent while the fuel oil index dropped by 24.8 percent.

Core November 2023 CPI

Regarding the core CPI data for November 2023 (i.e., inflation less food and energy), the index rose 0.3 percent month-over-month and 4.0 percent year-over-year, after rising by a narrow margin (0.2%) in October. Below is an itemized breakdown of the main price fluctuations seen in November’s core CPI reading:

  • Shelter index: +6.5%
  • Rent index: +0.5%
  • Personal care items: +5.2%
  • Lodging away from home: (-0.9%) (October: [-2.5%])
  • Motor vehicle insurance: +1.0% (October: +1.9%)
  • Medical care index: +0.6% (October: +0.3%)
  • Used cars and trucks: +1.6% (October: [-0.8%])
  • Index for apparel: (-1.3%) (October: +0.1%)

 

A bar chart depicting varying monthly CPI figures in 2023

Source: Bureau of Labor Statistics

Seasonally Unadjusted CPI Data for November 2023

Before seasonal adjustments, the CPI-U for November 2023 increased (+3.1%) year-over-year, rising to an index level of 307.051. Since these figures are unadjusted, they include regular seasonal price fluctuations that generally occur by the same margins every year.

A chart depicting declining 12-month CPI figures in 2023

Source: Bureau of Labor Statistics

Don’t Get Gaslit This Holiday Season

For some strange reason, the economic powers-that-be are intent on letting you know that the economy is in great shape.

Just last month, a Wall Street Journal headline read: “The Economy is Great – Why Are Americans in Such a Rotten Mood?” While it’s true that high consumer spending has kept America can sliding into a recession, this only tells a small part of the story. Behind the cheery backdrop of high spending and GDP growth is a grimmer reality: Americans have record levels of debt, increasingly unaffordable housing, sky-high borrowing costs, stagnant wages, and rising unemployment rates.

Don’t let the financial media fool you into believing that we’re on solid ground. The reality, unfortunately, is that America’s economic foundations could hardly be shakier.

Economic fundamentals don’t bode well for everyday Americans who, now more than ever, are struggling to make ends meet. The good news, however, is that you have the power to counteract the negative effects of inflation and other bearish macroeconomic indicators. Consider consulting with a financial expert about diversifying your investment portfolio with alternative assets such as gold and silver.

Investing in gold and silver can serve as a protective measure for your savings against the devaluation of the U.S. dollar, allowing you to preserve your wealth during times of inflation.

The historical events of 2008 and 2020 have demonstrated that assets such as gold and silver tend to outperform traditional securities when the financial markets are turbulent. For many investors, gold acts as a reliable hedge against inflation, offering a stable store of value when conventional investments face challenges.

If you’re considering diversifying your portfolio with gold or silver, you can take the first step by opening an account with one of the top-rated gold IRA service providers. In the meantime, you can use our complimentary CPI inflation calculator tool to monitor how inflation is affecting your household during the upcoming holiday season and beyond.

The Consumer Price Index Was Unchanged in October, Seasonally Adjusted, and Rose 3.2% Annually

The Consumer Price Index Was Unchanged in October, Seasonally Adjusted, and Rose 3.2% Annually

The Dow Jones Industrial Average spiked 400 points on Tuesday morning upon release of softer-than-expected inflation data for October.

The October 2023 report of the Consumer Price Index of All Urban Consumers (CPI-U) indicates that inflation was unchanged for the month, following a 0.4% monthly increase in September and a 0.6% increase in August. These data were released at 8:30 am EST on Tuesday morning, November 14, by the Bureau of Labor Statistics. Before seasonal adjustment, the year-over-year (Y-o-Y) inflation rate in the all-items index grew by 3.2%, marking a major deceleration from September’s CPI report.

October’s CPI report came in .1 point cooler than anticipated in every category (i.e., monthly unadjusted, year-over-year, core) according to an aggregated forecast report that cited a 3.3% expected year-over-year increase.

Financial markets opened on Thursday morning at a loss following September’s inflation news. The Dow Jones Industrial Average is down 90.55 points as of 11:30 a.m. on Wednesday, and the S&P 500 is down by 4.19 points.

The main driver of this month’s inflation deceleration is the reduction of energy prices in October, which dropped 2.5 percent. Price reductions in the energy sector offset price increases in the food and agriculture sectors. As a whole, the October 2023 CPI report was a pleasant surprise for most investors and market watchers, providing material support in favor of the Fed’s hawkish interest rate campaign. With this month’s positive inflation date, it is all but certain that future rate hikes will not take place in the near term.

Source: Bureau of Labor Statistics

October’s monthly CPI figure marks a sharp deceleration from September’s (0.4%) and August’s (0.6%) and remains the lowest CPI reading on a monthly basis in 2023. As depicted in the table above, the September 2023 CPI figure was largely driven by decreases in energy costs and energy commodities, including fuel oil.

Food Prices

The food index rose by 0.3 percent in October, a marginal increase over September, August, and July, which all saw increases of 0.2 percent. Notably, four of the six food sub-indices rose in October, including the index for meats, poultry, and fish, which rose by 0.7 percent, as well as pork which rose by 1.3 percent. Concurrently, the food at home index rose by 0.3 percent overall.

Energy Prices

Following a 1.5 percent increase in September and an even larger 5.6 percent hike in August, the energy index dropped 2.5 percent in October. The index for electricity rose by only 0.3 percent after a much more significant 1.3 percent increase in September. On the year, the fuel oil index fell by a precipitous 21.4 percent, marking the largest single-month decline in this key index in 2023.

On an annual basis, the energy index fell by 4.5 percent with mixed components, with the electricity index rising by 2.4 percent on a year-over-year basis.

Core October 2023 CPI

Regarding the core CPI data for October 2023 (i.e., inflation less food and energy), the index rose 0.2 percent month-over-month, beating September’s increase (0.3%) and maintaining July and June’s core CPI acceleration of 0.2 percent. Below is an itemized breakdown of the main price fluctuations seen in October’s core CPI reading:

  • Rent index: +0.5%
  • Lodging away from home: (-2.5%)
  • Motor vehicle insurance: +1.9%
  • Medical care index: +0.3%
  • Used cars and trucks: (-0.8%)
  • Recreation +3.2%
  • Personal care items: +6.0%

 

A chart depicting October 2023's CPI data

Source: Bureau of Labor Statistics

Seasonally Unadjusted CPI Data for October 2023

Before seasonal adjustments, the CPI-U for October 2023 increased (+3.2%) year-over-year, rising to an index level of 307.671. Since these figures are unadjusted, they include regular seasonal price fluctuations that generally occur by the same margins every year.

A chart depicting October 2023's CPI data

Source: Bureau of Labor Statistics

Protect Your Wealth This Holiday Season

October’s inflation reading came as a relief to countless investors who have been waiting for a marked slowdown in consumer price increases. Yet there’s no telling when or if inflation will begin to reaccelerate. Over the past 18 months, American families have seen their purchasing power diminish month after month, and the average American worker now has less of their paycheck to devote to monthly expenses. All the while, personal debts have risen fast—in fact, America’s total credit card debt exceeds $1 trillion and student loan repayments are once again mandatory after an over 3-year freeze on interest accumulation.

Fortunately, you have the power to counteract the negative effects of inflation and other worrisome macroeconomic indicators. Consider consulting with a financial expert about diversifying your investment portfolio with alternative assets. Hard investments in gold and silver have the potential to shield your savings from the diminishing value of the U.S. dollar and help you retain your wealth during inflationary environments.

Historical events in 2008 and 2020 have shown that assets like gold and silver have outperformed conventional securities during market turbulence. For many, gold serves as a safeguard against inflation, offering a dependable store of value when traditional assets falter.

Interested in diversifying with gold or silver? Get started by opening an account with one of the top-rated gold IRA service providers. In the meantime, our complimentary CPI inflation calculator tool can help you monitor how inflation is impacting your household over the upcoming holiday season and beyond.

The Consumer Price Index Rose 0.4% Seasonally Adjusted in September and Rose 3.7% Annually

The Consumer Price Index Rose 0.4% Seasonally Adjusted in September and Rose 3.7% Annually

The September 2023 report of the Consumer Price Index of All Urban Consumers (CPI-U) indicates that inflation increased by a lesser margin than August’s 0.6% month-over-month bump that was largely driven by rising gasoline prices. The CPI-U increased by 0.4% on a seasonally unadjusted basis in September 2023, according to the Bureau of Labor Statistics report published October 12, 2023. Before seasonal adjustment, the year-over-year (Y-o-Y) inflation rate in the all-items index grew by 3.7%, marking an identical increase to August’s CPI report.

September’s CPI report came in a bit hotter than anticipated according to a CNBC forecast that cited 0.3% and 3.6% month-over-month and annual increases, respectively.

Financial markets opened on Thursday morning at a loss following September’s inflation news. The Dow Jones Industrial Average is down 90.55 points as of 11:30 a.m. on Wednesday, and the S&P 500 is down by 4.19 points.

The main drivers of inflation according to September’s inflation report are shelter costs, which rose by 7.2% on a year-over-year basis. On a macro-economic level, the ongoing inflationary conditions appear to cast doubt on whether the Federal Reserve will issue yet another interest rate hike at the next Federal Open Market Committee meeting on October 31. Given hotter-than-expected inflation data, all signs currently point to there being another 0.25 basis point rate hike before year-end.

Source: Bureau of Labor Statistics

September’s monthly CPI figure marks a deceleration from August’s (0.6%) while outpacing July’s reading (0.2%).  As depicted in the table above, the September 2023 CPI figure was largely driven by increases in shelter costs (7.2), transportation services (9.1) and food away from home (6.0).

Food Prices

In September, the food index rose by 0.2 percent, the same marginal increase seen in both August and July. Notably, the index for food away from home rose by 0.4 percent, doubling the food at home index increase. Important price decreases include meat, poultry, fish, and eggs, which rose 0.5 percent in September, while bakery products and cereals decreased by 0.4%, marking the first time that this index segment decreased since June 2021.

Energy Prices

The energy index rose by 1.5 percent in September following a large 5.6 percent increase in August due, largely, to base year effects. The index for electricity rose 1.3 percent in September, a notable increase from August’s 0.2 percent uptick. Fuel oil represented a large portion of September’s energy price increases, rising 8.5 percent while the natural gas index decreased by 1.9 percent.

On an annual basis, the energy index fell by 0.5 percent with mixed components, including the natural gas index falling 19.9 percent year-over-year and the gasoline index rising 3.0 percent in September.

Core September 2023 CPI

Regarding the core CPI data for September 2023 (i.e., inflation less food and energy), the index rose 0.3 percent month-over-month, matching August’s increase and marking an increase from July and June’s core CPI acceleration of 0.2 percent. Below is an itemized breakdown of the main price fluctuations seen in September’s core CPI reading:

  • Rent index: +0.5%
  • Lodging away from home: +3.7%
  • Motor vehicle insurance: +1.3%
  • Medical care index: +0.2%
  • Used cars and trucks: (-2.5%)
  • Recreation +3.9%
  • Personal care items: +6.1%

 

Source: Bureau of Labor Statistics

Seasonally Unadjusted CPI Data for September 2023

Before seasonal adjustments, the CPI-U for September 2023 increased (+3.7%) year-over-year, rising to an index level of 307.789. Since these figures are unadjusted, they include regular seasonal price fluctuations that generally occur by the same margins every year.

Source: Bureau of Labor Statistics

Get Ahead of Inflation This Autumn: Protect Your Wealth

September’s inflation numbers indicate that August’s CPI reading wasn’t a fluke. Price increases are here to stay, despite the Fed’s hawkish rate hike campaign. The end result is that every American family has less purchasing power compared to this time last year, and the average American worker has less of their pay check to devote to monthly expenses. All the while, personal debts are rising fast—in fact, America’s total credit card debt exceeds $1 trillion and student loan repayments are once again mandatory after an over 3-year freeze on interest accumulation.

The good news is that you have the power to counteract the negative effects of inflation and other worrisome macroeconomic indicators. Consider consulting with a financial expert about diversifying your investment portfolio with alternative assets. Hard investments in gold and silver have the potential to shield your savings from the diminishing value of the U.S. dollar and help you retain your wealth during inflationary environments.

Historical events in 2008 and 2020 have shown that assets like gold and silver have outperformed conventional securities during market turbulence. For many, gold serves as a safeguard against inflation, offering a dependable store of value when traditional assets falter.

Considering taking a position in gold or silver? Get started by opening an account with one of the top-rated gold IRA service providers. In the meantime, our complimentary CPI inflation calculator tool can help you monitor how inflation affects your purchasing power within your household over the coming months.

The Consumer Price Index Rose 0.6% Seasonally Adjusted in August and Rose 3.7% Annually

The Consumer Price Index Rose 0.6% Seasonally Adjusted in August and Rose 3.7% Annually

The August 2023 report of the Consumer Price Index of All Urban Consumers (CPI-U) indicates that inflation jumped higher this month than any preceding month this year. The CPI-U increased by 0.6% on a seasonally unadjusted basis in August 2023, according to the Bureau of Labor Statistics report published September 13, 2023. Before seasonal adjustment, the year-over-year (Y-o-Y) inflation rate in the all-items index grew by 3.7%, marking a significant surge compared to July’s 3.2% and June’s 3.0% reading.

August’s CPI report came in hotter than expected according to a Dow Jones poll that found that most economists and analysts forecasted a 0.2% month-over-month increase.

Financial markets opened on Wednesday at a loss following August’s inflation news. The Dow Jones Industrial Average is down 32.46 points as of 10:30 a.m. on Wednesday, and the NASDAQ is down by 19.54 points. This marks the second consecutive month in which the U.S. headline inflation and core inflation rates have accelerated, following a gradual period of deceleration that lasted from mid-2022 to July of this year.

The main drivers of inflation according to August’s inflation report are gasoline prices (constituting over half the headline increase) as well as housing and shelter costs. Zooming out, present inflationary conditions are continuing to drift further away from the Federal Reserve’s target inflation rate of 2%—a policy aspiration that appears to be more and more out of reach without further rate hikes from the Federal Open Market Committee.

CPI inflation report for August 2023

Source: Bureau of Labor Statistics

August’s monthly CPI figure far outpaces that of July (0.2) while also outpacing June’s reading (0.2). This provides concrete evidence that price acceleration is not only occurring, as it was in July, but it also gaining steam and appearing to have some degree of longevity. As depicted in the table above, the August 2023 CPI figure was largely driven by increases in energy commodities, specifically gasoline (10.6) and fuel oil (9.1), as well as transportation services (2.0) which rely heavily on energy resources. Due to base year effects, these energy increases arrive in stark contrast against July’s inflation report which found rapidly decreasing costs of fuel oil (-26.5), energy commodities (-20.3), and gasoline (-19.9).

Food Prices

In August, the food index rose by 0.2 percent, the same marginal increase seen in July. Notably, the index for food at home increased by 0.2 percent, representing a decline from July’s rise in the same index by 0.3 percent. Important price decreases include dairy and related products, which declined by 0.4 percent, as well as the nonalcoholic drinks and fruits and vegetable indices which both declined by 0.2 percent.

Year-over-year, the food away from home index 0.3 percent in August, a notable cool-off compared to July’s 0.7 percent. However, the food at home index rose by a considerably larger margin, hitting 3.0 percent growth this month.

Energy Prices

Following a modest gain of 0.1 percent in July, the energy index rose by a remarkable 5.6 percent in August. This is largely due to the gasoline index rising by 10.6 percent in August and the electricity index rising by 0.2 percent.

On an annual basis, however, the energy index fell by 3.6 percent. This indicates that short-run energy costs are rising while the longer-term trends indicate a decline from last year’s price levels.

Core August 2023 CPI

Regarding the core CPI data for August 2023 (inflation less food and energy), the index rose 0.3 percent month-over-month. This marks an increase from July and June’s core CPI acceleration of 0.2 percent. Below is an itemized breakdown of the main price fluctuations seen in August’s core CPI reading:

  • Shelter index: +0.3% (+0.4% in July)
  • Motor vehicle insurance: +2.4% (+2.0% in July)
  • Rent index: +0.5% (+0.4% in July)
  • Lodging away from home: (-3.0%)
  • Prescription drugs index: +0.4%
  • Hospital services: +0.7%
  • Medical care index: +0.2% (-0.2% in July)

 

Source: Bureau of Labor Statistics

Seasonally Unadjusted CPI Data for August 2023

Before seasonal adjustments, the CPI-U for August 2023 increased (+3.7%) year-over-year, rising to an index level of 307.026. Since these figures are unadjusted, they include regular seasonal price fluctuations that generally occur by the same margins every year.

Source: Bureau of Labor Statistics

Get Ahead of Inflation This Autumn: Protect Your Wealth

August’s inflation numbers indicate that price increases are once again accelerating in America. The U.S. dollar’s value is declining day by day as more money enters circulation and consumer goods and services cost more to produce and get to market. The end result is that every American family has less purchasing power compared to the previous month, making it increasingly difficult to manage expenses, make ends meet, and save for retirement. All the while, personal debts are rising—in fact, America’s total credit card debt now exceeds $1 trillion.

Fortunately, you have the power to counteract the negative effects of inflation. Consider consulting with a financial expert to diversify your investment portfolio by including various asset types. These alternative investments have the potential to shield your savings from the diminishing value of the U.S. dollar.

During times of economic turbulence, like the 2020 stock market crash and the 2008 global financial crisis, historical data suggests that assets like gold and silver have outperformed conventional securities. For many, gold serves as a safeguard against inflation, offering a dependable store of value when traditional assets falter. Notably, accomplished investors such as Ray Dalio and Kevin O’Leary regard it as a valuable risk management tool.

Interested in embarking on a gold or silver investment journey? You can get started by establishing an account with one of the top-rated gold IRA service providers. In the meantime, stay vigilant about inflation trends in the coming months. Our complimentary CPI inflation calculator tool is accessible to help you monitor how inflation affects your purchasing power within your household. It effectively tracks the erosive impact of inflation, keeping you well-informed when preparing for your financial future.

The Consumer Price Index Rose 0.2% Seasonally Adjusted in July and Rose 3.2% Annually

The Consumer Price Index Rose 0.2% Seasonally Adjusted in July and Rose 3.2% Annually

According to the latest report of the Consumer Price Index of All Urban Consumers (CPI-U), inflation remains down by two-thirds from its mid-2022 peak. The CPI-U increased by 0.2% on a seasonally unadjusted basis in July 2023, according to the Bureau of Labor Statistics report published July 12. Year-over-year, before seasonal adjustment the all-items index grew by 3.2%, constituting a marked acceleration in the CPI-U from June’s 3.0% reading.

July’s better-than-expected headline CPI reading, while higher than the previous month by 0.2 percentage points, is lower than the 3.3% reading that most economic analysts expected heading into Thursday’s report.

Soft inflation data caused an immediate positive reaction in the markets, with the Dow Jones Industrial Average popping up +0.73% by mid-morning Thursday, constituting a 200-point gain. In general, inflation rates in the U.S. are continuing to decelerate, indicating that the Federal Reserve’s hawkish interest rate policy is working as intended—with the most recent 0.25 basis point increase having been announced only two weeks ago, during the July 26 Federal Open Market Committee press conference.

While many line items in the July 2023 CPI report suggest that prices are not increasing, especially concerning energy and utility prices, there is ample evidence that housing and lodging costs are the main drivers of inflation in America. All in all, July’s 2023 CPI numbers remain well over 50% higher than the Fed’s target inflation rate of 2%—a target that may prove unobtainable without further rate hikes from the central bank.

Source: Bureau of Labor Statistics

July’s monthly CPI figure matched the previous month (0.2) while outpacing May’s reading (0.1). However, May’s unusually low month-over-month CPI reading was an anomaly largely attributable to the base-year effect seen between April 2021 and 2022 due to the Russian invasion of Ukraine, an event that saw immediate and large-scale price increases in oil, gas, and certain natural resources. These prices then partially settled in the subsequent months.

As depicted in the table above, the June 2023 CPI figure was largely driven by increases in transportation (9.0), shelter (7.7), and food away from home (7.1). Downward pressure on the CPI was exerted by rapidly decreasing costs of fuel oil (-26.5), energy commodities (-20.3), and gasoline (-19.9).

Food Prices

The food index rose 0.2 percent in June after rising only 0.1 percent in June and increasing 0.1 percent in May, representing a core market segment where consumer prices rose compared to the month prior. Notably, the beef index rose 2.4 percent while eggs, fish, and poultry rose by a more modest 0.5 percent. The same reading (0.5%) is true of milk and dairy products as well.

Year-over-year, the food away from home index rose 7.1 percent in July 2023, whereas the food at home index rose by 3.6 percent—nearly half the price acceleration seen in restaurants and cafes in America.

Energy Prices

The energy index rose in July (0.1%) after rising rapidly in June (0.6%). The natural gas index spiked 2.0 percent on the month after seeing five consecutive monthly decreases. The good news for American households is that the energy index fell (-12.5%) year-over-year in July and the gasoline indexed fared even better—dropping a remarkable 19.9 percent on a 12-month span. Other large-scale price decreases were seen in both the natural gas and fuel oil indices.

Core July 2023 CPI

Regarding the core CPI data for July 2023 (inflation less food and energy), the index rose 0.2% month-over-month in July, maintaining the same acceleration rate as June. Below is an itemized breakdown of the main price fluctuations seen within July’s core CPI reading:

  • Shelter index: +0.4% (+0.4% in June)
  • Motor vehicle insurance: +2.0% (+1.7% in June)
  • Rent index: +0.4%
  • Lodging away from home: (-0.3%)
  • Airline fares index: (-8.1%)
  • Used cars and trucks: (-1.3%; +4.4% in June)
  • Medical care index: (-0.2%)

 

Source: Bureau of Labor Statistics

Seasonally Unadjusted CPI Data for July 2023

Before seasonal adjustments, the CPI-U for July 2023 increased (+3.2%) year-over-year and increased by 0.2 percent on the month, rising to an index level of 305.691. Since these figures are unadjusted, they include regular seasonal price fluctuations that generally occur by the same margins every year.

Now Is The Time to Protect Your Wealth

While the July Consumer Price Index report might appear positive, the U.S. dollar’s value is steadily declining day by day. The outcome? Countless American families now have reduced purchasing power compared to the previous month, making it increasingly difficult to manage their expenses. Though inflation is becoming more familiar, the average American household has actually seen its yearly wages decrease by around $7,400 due to inflation and interest rate increases since 2021.

The good news is that we can counteract the negative impacts of inflation. You might want to consider talking to your financial advisor about adding different types of assets to your investment portfolio. These alternative assets could potentially help safeguard your savings from the erosion of the U.S. dollar’s value.

Throughout various economic downturns and crises, such as the 2020 stock market crash and the 2008 global financial crisis, gold and silver have historically performed better than conventional securities. For many people, gold acts as a defense against inflation, providing a reliable store of value when traditional assets lose their worth. It’s no surprise that accomplished investors like Ray Dalio and Kevin O’Leary view it as a tool for managing risks.

Interested in starting to invest in gold or silver? You can begin by opening an account with one of the top-rated gold IRA service providers. While you’re at it, stay informed about inflation developments in the upcoming months. Our free CPI inflation calculator tool is available to help you monitor how inflation is impacting your household’s purchasing power. It effectively tracks the erosive effects of inflation, allowing you to stay in the know.

 

The Consumer Price Index Rose 0.2% Seasonally Adjusted in June and Rose 3.0% Annually

The Consumer Price Index Rose 0.2% Seasonally Adjusted in June and Rose 3.0% Annually

The Consumer Price Index for All Urban Consumers (CPI-U) increased by 0.2% on a seasonally unadjusted basis in June 2023, according to the Bureau of Labor Statistics report published July 12. Year-over-year, before seasonal adjustment the all-items index grew by 3.0%, constituting a major deceleration in the CPI-U from May’s 4.0% reading.

June’s rosy CPI report is the lowest in two years, when March 2021’s CPI report came in at 2.6% year-over-year. This month’s CPI report fared better than economists and investors expected, causing an immediate surge in the benchmark stock market indices on the morning of July 12. The rapid deceleration of the inflation rate in the U.S. is being taken by many as evidence that the Federal Reserve’s hawkish interest rate policy is performing as intended by successfully reining in inflation.

Nonetheless, the June 2023 CPI numbers are still 50% higher than the Fed’s target inflation rate of 2%—a figure that some doubt is possible to achieve without future rate hikes from the central bank.

Source: Bureau of Labor Statistics

June’s monthly CPI figure (0.2) came in higher than the previous month’s (0.1). The previous month’s “blip” in the monthly CPI report can be largely explained by the base-year effect seen between April 2021 and 2022 due to the Russian invasion of Ukraine, an event that saw immediate and large-scale price increases in oil, gas, and certain natural resources. These prices then partially settled in the subsequent months.

As depicted in the table above, the June 2023 CPI figure was largely driven by increases in consumer energy commodities and overall energy price increases.

Food Prices

The food index rose 0.1 percent in June after going unchanged in April and increasing 0.1 percent in May, representing a core market segment where consumer prices stagnated compared to the month prior. Notably, egg prices fell 7.3 percent in June after falling significantly in May—in total, egg prices have fallen by nearly half since the start of the year following a devastating avian flu outbreak that killed 43 million hens in 2022.

The meats, poultry, and eggs index dropped by 0.4 percent in June on the heels of an even large 1.2 percent decrease in May(-1.2%). However, year-over-year, the food at home index has risen by 4.7 percent, meaning your total grocery bill today compared to June 2022 is nearly 5 percent higher on average.

Energy Prices

The energy index rose in June May (0.6%) after falling in May. Notably, gasoline prices increased by 1.0 percent after dropping 5.6 percent in May. Concurrently, natural gas fell by 1.7 percent in June, marking the third consecutive month of natural gas price cuts. Fuel oil prices also fell, by about 0.4 percent in June.

Overall, energy costs inched up in June, constituting a minor deviation in the general trendline of falling energy prices ongoing since March. Year-over-year, energy prices are up 16.7 percent over 12 months.

Core June 2023 CPI

Regarding the core CPI data for June 2023 (inflation less food and energy), the index rose 0.2% month-over-month in June, down from a 0.6 percent acceleration in May. Below is an itemized breakdown of the main price fluctuations seen within June’s core CPI reading:

  • Shelter index: +0.4% (+0.6% in May)
  • Used cars and trucks: +4.4 (+4.4% in May)
  • Lodging away from home: (-2.0%) (+1.8% in May)
  • Medical care index: +0.1% (unchanged from May)
  • Household furnishings: +3.6%
  • Airline fares: (-8.1%) (-3.0% in May)

Source: Bureau of Labor Statistics

Seasonally Unadjusted CPI Data for June 2023

Before seasonal adjustments, the CPI-U for June 2023 increased (+0.3%) for the month, rising to an index level of 305.109. Since these figures are unadjusted, they include regular seasonal price fluctuations that generally occur by the same margins every year.

Now Is The Time to Protect Your Wealth

Although June’s CPI report may seem rosy, the U.S. dollar is only continuing to lose value by the day. The result? Millions of American families with less purchasing power than they had the month prior, making it that much harder to make ends meet. While inflation is beginning to enter familiar territory, the average American household has lost the equivalent of $7,400 in annual wages due to inflation and rate hikes since 2021.

Luckily, we can mitigate the adverse effects of inflation. Consider speaking to your financial advisor about diversifying your investment portfolio with alternative assets that may help insulate your savings from the devaluation of the U.S. dollar.

Gold and silver have historically outperformed traditional securities during most recessions and economic crises, including the 2020 stock market crash and the 2008 global financial crisis. For many, gold functions as an inflation hedge, providing a much-needed store of value when fiat assets depreciate. No wonder why it’s sought after by many successful investors like Ray Dalio and Kevin O’Leary as a risk management tool.

Want to get started investing in silver or gold? Open an account today with one of the best-rated gold IRA service providers. While you’re at it, stay up-to-date on inflation news in the months ahead. You can easily keep tabs on how inflation is holding back your household’s purchasing power by using our free CPI inflation calculator tool that tracks the wealth-eroding effects of inflation.

 

Inflation vs Recession vs Depression – How Are They Linked?

Inflation vs Recession vs Depression – How Are They Linked?

In the realm of economics, three terms often crop up in discussions about the health of an economy: inflation, recession, and depression. While they are interconnected in various ways, each term represents a distinct economic phenomenon with different implications for the economy and, by extension, for investors, businesses, and consumers. This article will delve into the definitions of inflation, recession, and depression and explore how they are linked. Let’s start by looking at a comparison table:

Inflation Recession Depression
Definition General increase in prices. Significant decline in economic activity, typically for two quarters or more. Severe and prolonged downturn in economic activity.
Impact on Economy Decreases purchasing power. Can stimulate economic activity when moderate, but leads to instability when too high. Results in higher unemployment, decreased consumer spending, and economic slowdown. Severe declines in employment and production, often causing significant economic hardship.
Common Causes Excessive growth in the money supply, demand-pull, or cost-push factors. Various, including financial crises, economic bubbles, or external shocks. Often a severe or prolonged recession, but can also be caused by a financial crisis or large-scale economic dislocation.
Central Bank Response May raise interest rates to slow economic activity and curb inflation. May lower interest rates and increase government spending to stimulate economic activity. Similar to recession, but response typically needs to be larger and more sustained. May involve significant fiscal policy responses as well.
Link to Other Two Terms High inflation can lead to a recession. Recession can lead to low inflation or deflation. Can turn into depression if severe and prolonged. Lower demand during a recession can lead to lower inflation. Could lead to deflation due to lower demand. However, policy responses could potentially lead to inflation.

Inflation

Inflation is the rate at which the general level of prices for goods and services is rising, eroding purchasing power. In other words, as inflation increases, each unit of currency buys fewer goods and services. Inflation is updated monthly.

Moderate inflation is typical in a growing economy and can even stimulate economic activity. However, if it gets out of hand, it can lead to economic instability. The BLS uses the CPI to measure inflation.

The Federal Reserve, like most central banks, aims to control inflation by adjusting interest rates. Lower interest rates encourage spending and investment, which can boost economic activity and, potentially, inflation. Higher interest rates can slow economic activity and curb inflation.

Recession

A recession is typically defined as a significant decline in economic activity spread across the economy, lasting more than a few months. This is often seen in real GDP, real income, employment, industrial production, and wholesale-retail sales. Economists generally agree that two consecutive quarters of negative GDP growth indicate a recession.

Recessions can be caused by various factors, including financial crises, external shocks, and the bursting of economic bubbles. Policymakers often respond to recessions by lowering interest rates and increasing government spending, aiming to stimulate economic activity.

Depression

A depression represents a severe and prolonged downturn in economic activity. It’s more extended and more profound than a recession, characterized by significant declines in output, employment, and trade, often lasting several years. The most notable example is the Great Depression of the 1930s.

Depressions are rare, and economists don’t have a standardized definition like they do for a recession. However, they generally agree that depressions involve a substantial contraction in economic activity that lasts several years.

How Are They Linked?

Inflation, recession, and depression are intertwined in many ways:

  1. Inflation and Recession: Too much inflation can lead to a recession. When prices rise too quickly (hyperinflation), consumers can struggle to afford goods and services, and businesses can find it challenging to plan for the future. If the central bank tries to combat high inflation by raising interest rates too quickly, it can cool the economy too much and lead to a recession.
  2. Recession and Inflation: On the flip side, recessions can lead to lower inflation or even deflation (a general decrease in prices). In a recession, demand for goods and services falls, which can lead to lower prices.
  3. Recession and Depression: If a recession is particularly severe and prolonged, it can turn into a depression. While there’s no strict dividing line, depressions involve higher unemployment, lower output, and more significant declines in standards of living than recessions.
  4. Inflation and Depression: Inflation rates during a depression can vary. Sometimes, depressions can involve deflation, as demand for goods and services falls and businesses lower prices to try to entice customers. However, economic policy responses to a depression could lead to inflation. For example, if the government responds by increasing the money supply or government spending dramatically, it could eventually lead to increased inflation.

In summary, inflation, recession, and depression are all interconnected elements of economic cycles. By understanding these terms and their relationships, we can better grasp the complexities of economic health and make

FAQ

Q1: What causes inflation? A1: Inflation can be caused by various factors, including excessive growth in the money supply, demand-pull inflation where demand for goods and services outpaces supply, or cost-push inflation where the cost of raw materials or wages increase.

Q2: How can inflation be controlled? A2: Central banks often aim to control inflation by adjusting interest rates. By raising interest rates, central banks can decrease borrowing and spending, thus reducing inflation. Conversely, lowering interest rates can stimulate borrowing and spending, potentially leading to increased inflation.

Q3: What are the signs of a coming recession? A3: Common signs of a coming recession include a decline in the GDP, higher unemployment rates, lower consumer spending, decrease in business profits, and a volatile stock market.

Q4: How can a recession affect the average person? A4: During a recession, people might face job loss or reduced working hours. They may also see the value of their investments decrease, and it could become harder to get credit.

Q5: What’s the difference between a recession and a depression? A5: The main difference between a recession and a depression is the duration and severity of the economic downturn. A recession is a temporary decline in economic activity, typically lasting six months to a year. A depression, on the other hand, is a severe and prolonged economic downturn, often lasting several years.

Q6: How do governments respond to a depression? A6: In a depression, governments may enact expansive fiscal policies, such as increasing government spending, cutting taxes, or both, to stimulate the economy. Central banks may also adopt expansionary monetary policies, such as lowering interest rates or implementing quantitative easing.

Q7: Can a depression lead to inflation? A7: A depression could potentially lead to deflation due to lower demand. However, the economic policy responses to a depression, such as increasing the money supply or government spending, could eventually lead to increased inflation.

Q8: How does a recession affect inflation? A8: A recession typically leads to lower inflation or even deflation. This is because, in a recession, the demand for goods and services falls, which can lead to lower prices. However, the specific impact on inflation can vary depending on the nature and severity of the recession, and the policy responses to it.

Q9: What role do central banks play in managing the economy through these cycles? A9: Central banks play a crucial role in managing the economy through inflation, recession, and depression. They often use tools like interest rates and open market operations to influence the money supply, aiming to stabilize prices and maintain low unemployment rates.