Up and Down History of US Inflation Explained


There are number of periods in history where the inflation in the U.S. was heightened. For example, a booming economy in the late ‘60s led to rising prices. Former President Nixon implemented wage-price shocks to halt inflation, but this eventually followed by a recession.

US inflation based on Events from year 1965 to year 2021

In the years that followed, surging oil prices were a main culprit behind periods of higher inflation. The early ‘70s were impacted by the oil embargo, when OPEC countries stopped oil exports to the United States. At the same time, U.S. oil producers didn’t have additional capacity and non-OPEC oil sources were declining as a proportion of the world oil market. This meant the U.S. was unable to increase supply to meet demand, and OPEC countries had more power to influence oil prices.

Fast forward to 2021, and the COVID-19 recovery has again led to a higher inflation rate in the United States. A number of factors are responsible, including surging consumer demand, supply chain problems, and a labor shortage.

Inflation During a COVID-19 Recovery

Amid lockdown , demand for goods kept increasing . It remained high even after demand for services recovered. Compared to February 2020 , demand for goods in December 2021 was 22% higher.

To make matters worse, Supply chain weigh on heavy and business inventories were at record lows. Retailers can cover just over one month of sales from existing inventories, down 25% compared to February 2020. Not only that, there is a severe labor shortage. Total private job openings increased from 6.2 million in February 2020 to 9.6 million in November 2021.

The lack of supply is leading to higher material and wage costs for businesses, with some categories hit particularly hard. For example , the price of used cars and trucks has risen over 37% as the semiconductor shortage hampers the production of new vehicles. Commodities were also had double digit % price hike and some of them even 3 digit like lumber.

With All that what is in for next year for inflation numbers ?

What does it mean for Your investment?

It’s simple if you believe in Economy and there is no recession in coming years financial and property sector will do good.

Energy and mining sector is two more sector to consider as well during rising interest rate.