NASHVILLE, Tenn. (WKRN) – Inflation jumped at its fastest pace in nearly 40 years last month, according to the Associated Press. The U.S. Department of Labor reported the Consumer Price Index for All Urban Consumers (CPI-U) increased 0.5% in December on a seasonally adjusted basis after rising 0.8% in November.
“The fluctuation that we’ve seen recently, it’s actually a short-term phenomenon and whether or not it remains depends on how the market responds to it,” said Dr. Hannah Stolze, Director of Lipscomb University’s Center for Transformative Sales & Supply Chain Leadership.
According to the U.S. Bureau of Labor Statistics, the all items index increased 7% before seasonal adjustment over the last 12 months.
“The initial fluctuation that we’ve seen in prices in the last year is because of momentary incidents,” said Dr. Stolze. She used the recent snowstorms in Middle Tennessee as an example adding that if consumers bought two months’ worth of toilet paper in one day, retailers might increase their orders to meet the perceived demand.
“It creates this huge stress on the entire supply chain and we know that as demand spikes and supply goes down, prices are going to go up to adjust for that,” she explained. “That’s what we’ve seen. And it can be short term or long term, it depends on how we respond in our consumer buying for how that trends out over the long run.”
Over the past 12 months, the Consumer Price Index for food increased more than 6%, it was about the same for electricity, it increased 11% for new vehicles, and 37% for used vehicles.
According to Dr. Stolze, the pandemic is a significant factor for whether or not there are more changes to inflation and the global supply chain.
“If COVID doesn’t go away quickly, it’s going to continue to create bottlenecks, it’s going to continue to create global challenges because we don’t have the same airlines moving back and forth to create that product flow,” Dr. Stolze said. “It depends on how quickly we get out of this pandemic and it depends on what US labor does, and it depends on how we as Americans, and you know, Nashvillians, shift how we’re buying.”
Experts like her are now watching to see how the market reacts to the changes.
“The prices on the grocery shelf may not move as quickly as we would anticipate because they are domestic, and there is a little bit of buffer there. And the prices we’ll want to be watching are going to be electronic prices,” she said. “‘Then we’ve seen in the automotive industry, right, where the prices have shifted quite a bit. Because we’ve seen the full bullwhip in the auto industry.”
The AP reports the Biden Administration and Federal Reserve are now facing mounting pressure to address what some experts call the biggest threat to the U.S. economy.
“U.S. inflation pressures show no sign of easing,” said James Knightley, chief international economist at the financial services company ING. “It hasn’t been this high since the days of Thatcher and Reagan. We could be close to the peak, but the risk is that inflation stays higher for longer.’’
*The Associated Press contributed to this article.