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Prices of consumer goods continue to rise, but what does that mean long term?

USDA predicts grocery prices will continue to rise in 2021
Posted at 6:34 PM, Aug 12, 2021
and last updated 2021-08-12 18:34:40-04

(WSYM) — From higher prices at the grocery store to housing costs that have been shooting through the roof, the price tag of just about everything has gotten the attention of people who don't usually recognize a fluctuation in the cost of the products they buy.

But high inflation has people taking notice and wondering when things will begin to cool down.

Andre Watson on the rising prices of goods
Andre Watson on the rising prices of goods

"The presence of inflation is becoming more apparent to everyday individuals and I believe it's actually the most dominate threat that may not be spoken to," said Andre Watson as he finished buying a few grocery items in Southfield. "We're not sure how are system will just balance itself out or will this become a new threat in everyday living."

Jennifer Reid's husband is a technician in the auto industry, so he can save their family a lot of money doing repairs for their vehicles and around the house, but even DIYers are feeling the pinch.

"We try to be frugal, we try to work hard and save money. We're not frivolous whatsoever. And we're feeling the impact," she said.

Jennifer Reid on the rising costs of goods
Jennifer Reid on the rising costs of goods

And many Americans are wondering if prices will fall back down. Economist Paul Traub said yes and no.

"Do we feel those prices are baked now into the pie? And I would say some of them are, but it may not be the five or six-percent kind of price increases that we see today," said Traub.

And when you look back to when the pandemic hit and the economy slowed down, there were many people who didn't lose money because they went to working from home or had to go on unemployment which included additional federal dollars.

And while the economy bounced back quickly and consumer demands continue to surge, a bottleneck in the supply chain is expected to keep prices elevated.

"With companies inability to get parts and supplies, demand rising very rapidly, hard to find workers to bring up capacity, they started to struggle with ramping back production," said Traub.

Economist Paul Traub
Economist Paul Traub

It's economics. Supply and demand.

"It's too much money chasing too few goods," he said. "And I think as the economy gets back, and everybody gets back to work, those prices will stabilize and you won't see this kind of inflation. And you might see, in some areas, some reduction of prices," he said.

Getting COVID under control, Traub said, is the biggest challenge.

"We have to be able to, for business leaders, to be able to sit down and say, OK, the price of the input to the goods that I'm producing, will go up by five-percent next year. If I know that, I can build that into my business plan ... or it's going to go up by three-percent next year, I can build it into my business plan. But it needs to be a consistent number that people can deal with and not that large fluctuations that we've seen this summer as the economy opened and all that money chased a fixed amount of goods and services."