While November data isn’t yet available, the Houston metroplex shows a 6.1 percent CPI increase from October 2020 to 2021.
This means, simply, that Texans are paying more for the goods they purchase such as milk, eggs, gasoline, and electricity.
From October, the residential price of electricity increased 0.71 cents per kilowatt-hour (kWh) over the previous year — slightly below the 0.84 cents per kWh increase across all electricity consumption sectors.
For an average home, that would amount to between an $8 and $9 difference in their monthly energy bills.
The price of eggs has risen $0.18 and the price of bread has increased $0.21 over the last year.
Inflation in 2021 across the U.S. is just shy of 7 percent with one month of data left to be tracked. Put simply, inflation is the decrease in the purchasing power of currency.
Feeding inflation is a multitude of factors, such as the increased cost of goods or doing business. Another factor is the prevalence of the currency. The more dollars are in circulation the less value each individual dollar has and vice versa. This past year, the federal government has ramped up spending and decreased interest rates trying to preserve some semblance of the pre-pandemic commerce.
“There will be higher prices in specific locations or particular goods and services based on underlying supply and demand, such as people flocking to Texas from other states for opportunities to flourish,” Vance Ginn, chief economist with the conservative Texas Public Policy Foundation, told The Texan, adding, “but ultimately inflation is always and everywhere a monetary problem.”
The institution that sets the country’s monetary policy is the U.S. Federal Reserve, the printing press at the center of the world’s most crucial economy which decides when and how much currency to release into the economy. One tool it uses to regulate the currency in circulation is interest rates.
Higher interest rates discourage excess lending while lower interest rates do the opposite. The latter leads to more debt accumulated by borrowers which increases the amount of currency in circulation, further devaluing the dollar’s buying power. Higher interest rates naturally shrink the circulation pool, increasing the individual dollar’s value.
During the inflation crisis of the late 1970s and early 1980s, the Federal Reserve Reagan administration’s Federal Reserve raised interest rates which led to the inflation rate dropping nearly 10 percent in eight years.
But the current administration’s strategy has been to try and jumpstart consumer spending by increasing the amount of money available to spend.
Ginn places the inflation’s central cause with Congress’s ramped up coronavirus spending. That spending has occurred with the assent of both the current and former president but has continued in Joe Biden’s first year in the Oval Office despite unemployment and commerce recovering substantially from its 2020 pitfall.
He describes the situation as “too much money chasing too few goods.”
Functionally, supply shortages with an unchanging or increased demand cause the price to increase. There are growing shortages for various products as the supply chain tries to catch up to returning consumer demand. One of the most significant examples is the global semiconductor shortage, microchips used in everything from cars to airplanes to miscellaneous electronics.
The biggest supply chain event of the year was the Suez Canal blockage that occurred when a ship passing through was run aground by a gust of wind. This caused weeks of blockage and months of shipping delays.
But shortages are not just occurring for goods. They’re also driving up the cost of labor.
While unemployment has improved drastically from the pandemic’s early months, it continues to lag behind the lows Texas posted before coronavirus and the government closures left many out of work.
The premium placed on workers has caused employers to pay more for the employees they can find, which then leads to higher prices for the coffee, fast food, or whatever product is being sold. Government unemployment payments, vaccine mandates, and the unwillingness of some to return to everyday life has led to the current workforce deficiency.
All in all, Ginn concluded, “Inflation is hitting Texans where it hurts: their wallet.”
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Brad Johnson is an Ohio native who graduated from the University of Cincinnati in 2017. He is an avid sports fan who most enjoys watching his favorite teams continue their title drought throughout his cognizant lifetime. In his free time, you may find Brad quoting Monty Python productions and trying to calculate the airspeed velocity of an unladen swallow.