Is Inflation a Real Risk? A Look at the Statistics
Inflation is a major economic concern that affects everyone. It’s a measure of the rate at which prices for goods and services are rising. When inflation is high, it can erode purchasing power and cause people to struggle to make ends meet. But is inflation a real risk? Let’s take a look at the statistics.
Inflation is measured by the Consumer Price Index (CPI). This index tracks the price of a basket of goods and services that are common to most households. The CPI shows that inflation has been relatively low in recent years. In 2020, the CPI was 1.4%, the lowest since 2015.
However, it’s important to note that inflation can vary widely from year to year. For example, in 2019, the CPI was 2.3%. This was the highest rate since 2012. This means that prices increased at a faster rate than in the previous year.
It’s also important to consider the impact of inflation on wages. When the rate of inflation is higher than the rate of wage growth, workers can find themselves struggling to make ends meet. This is because their wages don’t increase as quickly as the cost of living.
The good news is that wages have been increasing in recent years. In 2020, average hourly earnings increased by 3.7%, the highest rate since 2009. This means that workers were able to keep up with the rising cost of living.
It’s also important to look at the impact of inflation on investments. When inflation is high, it can erode the value of investments. This is because the return on investments is typically lower than the rate of inflation.
Fortunately, the rate of inflation has been low in recent years, which has allowed investors to enjoy higher returns. In 2020, the S&P 500, a popular stock market index, returned 18.4%. This was the highest return since 2013.
Overall, inflation is a real risk, but it’s important to look at the statistics to get an accurate picture. Inflation has been relatively low in recent years, and wages have been increasing at a faster rate than inflation. This means that workers have been able to keep up with the rising cost of living. In addition, the rate of inflation has been low, which has allowed investors to enjoy higher returns on their investments.