In the unpredictable realm of the global economy, there's a silent but powerful force that can weigh heavily on the success of your business: inflation. This metric is critical to keep track of; the state of inflation can either fuel your success or threaten your stability. Let’s dive into a brief discussion on the August 2023 CPI update.
Statistics
2022 predictions left us hoping to reach a 2% year-over-year inflation rate by the end of 2023. However, as we near the end of the year, current statistics make this goal appear to remain out of reach. Between May and July, inflation seemed like it was slowing down. Month-to-month inflation reports listed the “All items” increase at 0.1% and 0.2%. The latest numbers for August 2023, which were posted September 13, report that the “All items” index leapt from 0.2% to 0.6% within that month. This CPI report also remarks on a 3.7% rise in all items since August 2022, which puts us a bit off course for that 2% goal. The 3.7% year-over-year number is also a notable increase from July’s report of 3.2%. Let’s break down what’s changed economically amidst this steep rise in inflation.
One of the largest changes we’ve seen in the past month alone is the recent hike in fuel prices. Fuel price increases jumped from 3% to 9.1% between July and August alone. The rate of increase for all types of gasoline in general went from 0.2% to an astonishing 10.6% in the same short period.
For the 40th consecutive month, the cost of shelter has gone up. Other notable factors contributing to rising inflation are energy, which has increased to 5.6%, and food, which now sits at 0.2%.
Some sources say that, despite the massive increase in fuel prices, other reported numbers show promise for reducing inflation. Without higher gas prices, the overall year-over-year inflation rate as of August would be substantially lower than it is. For example, the hike in inflation from 0.3% to 3% in the transportation services category was almost certainly driven by the rise in fuel prices.
As of September 20, 2023, the Federal Reserve has confirmed that interest rates will remain the same in an effort to combat inflation, with a target rate of 5.25%-5.5%, marking a 22-year high. The Fed is expected to hike rates at least once more before the end of the year. This means that borrowing costs will continue to rise and the loan application process will become more difficult. Higher interest rates are meant to strengthen the US dollar and slow down inflation.
What does this mean for you?
Although prices are high at the moment, this does not mean that we won’t see a change in the future! With promising numbers from the latest CPI report coupled with continued efforts from the Federal Reserve, we may see change occurring as soon as next year.
In the world of sales, we all know that inflation makes a major difference in the way we run our companies and handle our pricing and finances. It’s important to stay aware of both the current and predicted states of the economy to plan your next steps and ensure financial stability. No matter where inflation goes from here, we have you covered. Check out our article, Preparing your business for an uncertain economy, for some great tips and tricks for tackling inflation.