You will be hearing about inflation frequently during this holiday season. The current administration forecasted a 2% inflation rate. The Consumer Price Index numbers were just released, and from October 2020 to October 2021 the inflation rate was 6.2%! This is the highest increase in the last 30 years!
My friend Jay (originally from New Jersey) was in town from Maryland this weekend, and his favorite pizza is from New Park, so we had to go last Sunday before heading to Madison Square Garden for the Rangers vs. Devils game. We were 3rd in line after 2 gentlemen who looked like they were in their late 60’s. When the first man’s pie order came out, he asked, “how much do I owe you?” The worker said $27 to the surprise of the man. I said, “inflation just kicked in right now” and all 3 of us laughed.
Since the early 1960s, the price of a regular New York slice has almost matched the price of a subway token. This was called the “Pizza Principle” or the “Pizza-Subway Connection!”
From New Park, I needed gas and paid over $4 per gallon for 91-octane on a credit card. I have seen gas in Manhattan for $5 per gallon. As per the Automobile Association of America, the national price of regular gas is currently $3.41 per gallon. The New York State average is $3.56 per gallon. The Manhattan average price is $4.33 per gallon.
This got me thinking about what has caused this inflation to be running rampant! Basic economic supply and demand are what triggers inflation. There are root causes for what is going on right now and we must adjust our budgets to cover these higher costs.
The reasons include, but are not limited to:
- Government Covid Relief Bill: This bill disincentivized some people from returning to work. Now employers are seeking workers and paying higher salaries to hire them. Increased wages cause inflation.
- Supply Chain Shortages and Delays: The majority of US goods are trucked from coast to coast. There is a shortage across of 80,000 truckers across America. Long-haul truckers have gotten a raw deal over the years as working conditions have deteriorated. According to the U.S. Bureau of Labor, the median trucker salary is only $47,000 per year, and adjusted for inflation, their purchasing power is down 30% from 1970-2020.
- Increased Costs of Raw Materials: A combination of factors including increased gas and transportation costs and food shortages have driven up prices. Your favorite Queens Pizzerias are paying more for tomatoes, cheese, basil, olive oil and cardboard boxes. Some of these prices increases have been passed on to the consumer.
- Corporate America: When the pandemic first hit in 2020, corporations such as the airlines and automakers, went into survival mode and cancelled semiconductor orders, furloughed workers and slowed down production, which created supply shortages. As the public had more disposable income, the demand increased faster than the bounce back in supply. Unfortunately, this is not going away anytime soon.
In summary, this will really impact Americans this Thanksgiving and Holiday Season. This is a good time to adjust budgets and control spending, as your dollar will not go as far as it used to.