Inflation’s Down – Why Prices Still Feel High: While inflation rates have been declining in recent months, many consumers are still feeling the pinch when it comes to rising prices. Even as the cost of living increases at a slower pace, everyday expenses continue to outpace wage growth, leaving many wondering why things feel so expensive.
Several factors contribute to this phenomenon:
- Sticky Prices: Once prices rise, businesses may be reluctant to lower them, even when inflation subsides. This can be due to factors like increased operating costs or a desire to maintain profit margins.
- Supply Chain Disruptions: The ongoing impact of supply chain disruptions, exacerbated by the COVID-19 pandemic and geopolitical tensions, has led to higher costs for businesses, which are often passed on to consumers.
- Wage Growth Lag: While inflation has been slowing, wage growth has not kept pace. This means that consumers have less purchasing power, even as prices increase at a slower rate.
- Corporate Profits: Some critics argue that corporations have been using inflation as an excuse to increase profits rather than passing on savings to consumers.
As a result of these factors, many consumers are still struggling to make ends meet. While the decline in inflation is a positive sign, it may take some time before prices return to pre-pandemic levels.
Categories: Financial Planning Center