Good News: Inflation Slowing

Inflation picture

Good News: Inflation Slowing
| Published April 15, 2014 |

By Thursday Review staff

For those readers who wrote to us over the last few weeks to complain that our writers prepare and post too many articles about how BAD the economy is, here is some good news: inflation levelled out last month (in March), largely the result, some economists believe, of a lower-than-expected rise in the price of gas at the pump, along with a quick transition to spring weather (though we may not be out of the snow yet!) and moderate home energy costs.

As was widely expected, a particularly rough combination of circumstances aligned to bring about rising costs over the previous four months: harsh weather conditions which included extreme low temperatures, snow and ice across much of the country, which triggered a mini-energy crisis in home heating; a severe, extended drought in California, a state which produces a significant share of the U.S. food supply; and a wide range of Polar Vortex-related pass-alongs—higher transportation costs, delayed orders, slumping car sales, stymied home construction and a downturn in new home sales and real estate.

In addition, the strained and tense relationship between the Ukraine and Russia contributed to market speculation which further drove up worldwide gas and oil prices. And a severe drought in Brazil has adversely affected the price of numerous products, including oranges, sugar and coffee.

Gas prices at the pump rose, but have now—in some areas of the country—begun to slide back down. These lower gasoline prices, coupled with reluctance by struggling retailers to increase prices (for fear of scaring off consumers) meant that inflation held steady. A good sign, perhaps; but also a sign that the overall U.S. economy may still be struggling with lingering effects from the Great Recession.

Where food and energy prices tend to be more volatile, all other price factors tend to move more slowly. Big retailers, many of whom (like JC Penney, Staples, Family Dollar and Radio Shack) have faced withering challenges in the last few years from Amazon and other online retailers, are reluctant to raise prices at a time when many consumers are strapped for cash and shopping for bargains.

In 2013, consumer prices rose only about 1.5 percent, lower than the overall rate of inflation the previous year.

Related Thursday Review articles:

Family Dollar to Scale Back; R. Alan Clanton; Thursday Review; Saturday, April 12, 2014.

Staples to Close 12% of Stores; R. Alan Clanton; Thursday Review; Friday, March 7, 2014.