Why Are Prices Rising?

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Why Are Prices Rising?

Houses. Cars. Gas. Why is everything so much more expensive than it was a year ago?

If you think you’re spending more on things like gas and food than you were at this time last year, you’re right. That’s because we seem to be reopening to a more expensive economy than the one that existed pre-pandemic.

It’s not necessarily price gouging. In fact, it has a lot to do with a shortage of materials that manufacturers need to make their products. When supply is low, prices climb for manufacturers, and consumers end up paying more for the end product. It seems silly, but even things like the cereal, Grape-Nuts, has been hard to come by.

Kristin DeRock, the Grape-Nuts brand manager, said in a recent interview that making the unique breakfast cereal involves “a proprietary technology and a production process that isn’t easily replicated, which has made it more difficult to shift production to meet demand during this time.”

It’s also been hard to get your hands on things like fitness gear, sofas, and lumber. The shortages and price increases have to do with several factors. The work-from-home economy put never-before-seen pressures on companies that both struggled to estimate demand and were forced to halt production for safety reasons.

As imports have picked up speed on the back of surging (and erratic) consumer behavior, US shipping ports have become unusually congested. The early 2021 freeze in Texas compounded these problems, suspending oil production and impacting the manufacturers who rely on it.

Tight capacity, low inventory, and fiscal stimulus have created the “perfect storm” causing both big-ticket and everyday items, from hot tubs and bikes to meat and cheese, to cost a whole lot more because of the unusual conditions created by reopening.

“So how long will these high prices last?”

Experts agree and anticipate these disruptions lasting until early 2022. Until then, the stimulus will continue to drive demand and the pandemic will continue to rattle the movement of everyday goods, keeping prices higher into early next year.

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