You’re not the only one to notice — prices have increased.
Prices of all goods on the Consumer Price Index rose 7% during the past 12 months, according to the Bureau of Labor Statistics. The prices for grocery staples of meat, poultry, fish and eggs increased about 13% in December compared with a year earlier. Other big increases during that time period include gasoline (almost 50%), used vehicles (37%) and energy (29%).
Unfortunately, high inflation rates could be here to stay unless the Federal Reserve aggressively enacts policies to drive prices down, Old Dominion University economist Robert McNab said Wednesday during the Strome College of Business’ annual economic forecast.
With aggressive steps, he said inflation could ease by the second half of 2022. A more cautious approach could mean more price increases for U.S. consumers at least until 2023, McNab said.
“The large concern I have is they’re still hoping this is transitory, and so they’re going to be cautious about monetary policy,” McNab said.
Several factors laid the groundwork for inflation, McNab told the audience.
Driven by stimulus checks and other factors, consumers increased their spending on retail and food services during the pandemic — from a nadir of about $410 billion in the spring of 2020 to $627 billion in December, according to the U.S. Census Bureau. Housing prices also climbed during that time. Finally, as a result of Fed decisions, a large influx of cash entered into circulation after the pandemic began.
However, McNab said he believes the pandemic stimulus was the right move. In a response to a submitted question about inflation, he asked participants whether they would rather have higher prices on goods or a sky-high unemployment rate.
“You have an appropriate response to a historic economic shock,” McNab said. “We could have been in a long-running recession if we did not respond with aggressive fiscal monetary policy.”
Just like the rest of the country, housing prices have climbed in Hampton Roads during the past year, fellow ODU economist Vinod Agarwal said. The median sales price for existing homes in 2021 was $279,000, up around 9% from the previous year, according to regional Real Estate Information Network data. Demand also is extremely high. Agarwal said it would take less than a month for the supply of houses to run dry if no new properties went up for sale.
For 2022, the ODU economists expect the region’s gross domestic product, when adjusted for inflation, to grow 2.4%. That’s slightly behind the country as a whole, whose real GDP is expected to grow 3% during the same time period.