By: Ke Tang
Inflation in October is rising more than expected. According to the US Bureau of Labor
Statistics, the consumer price index in October has increased 0.9% and pushed the year-over-
year increase to 6.2%, hitting a 30-year high. In comparison, the consumer price index in
September has risen 0.4% on the month and 5.4% on the year. 1 The rise of inflation exceeds
people’s expectations and will increase people’s costs for living. However, it is not necessarily
that inflation will influence everyone equally. Depending on an individual’s consumption basket,
the impact on one’s cost of living will be different because different products have experienced
various levels of inflation. Furthermore, those in the lower-income status will be influenced the
most as they are most vulnerable to price changes.
Causes of inflation
The cause of inflation is primarily due to the global supply chain disruption caused by the
pandemic. At the start of the pandemic, the US economy collapsed in the spring of 2020. The
economy shut down: businesses slashed 22 million jobs, consumption decreased dramatically as
consumers stayed at home due to health concerns, and investment slowed down as businesses
reduced working hours. Economic output decreased at an astonishing 31% annual rate in 2020’s
April-June quarter. 2
However, the recession is not prolonged fueled by massive government subsidy, quantitative
easing policy, and massive vaccine rollout. Lightened COVID concerns have driven consumers
to leave their homes and return to restaurants and bars. However, manufacturers and businesses
were unable to keep pace with the sudden return in demand. Businesses were unable to hire
enough people or order raw materials within a short amount of time, and ports cannot handle
such a large amount of traffic. This creates an imbalance between supply and demand.
Moreover, as people are reluctant to go back to work and the upstream of the supply chain is
unable to produce adequate raw materials, labor and input cost increased dramatically for
businesses. As supply is in shortage when facing an excessive demand, businesses decided to
pass the increase in costs to consumers, who have managed to accumulate a certain amount of
savings during the pandemic from COVID relief. Hence, the reduction in supply and an
overstimulating of demand have worked together and contributed to the rise of inflation.
Energy commodities and used vehicles
People who are seeking to buy vehicles or those who rely heavily on private cars for
transportation have experienced the biggest impact from inflation. Energy price has increased the most across all categories, and it has experienced a one-year change of 49.5% until now.
Specifically, gasoline price has increased more than 50%, which imposes significant costs on
transportation. The increase is primarily due to the rise of demand and constrained oil supply: US
oil production has seen a relatively slow rebound from the pandemic as US oil companies are
aware that an oversupply of oil can cause a drastic price decrease. On the other hand, the natural
gas price has seen an increase of 28%, which imposes a cost on customers’ heating bills as a
majority of US families still rely on fossil fuels and natural gas to generate electricity. 3
The automobile industry is hit severely as well. The global supply disruption has led to the
inadequate supply of inputs to build automobiles, such as chips and metals. Therefore, used cars
have seen a 26% increase in price and rental cars over 40% in a single year. It directly influences
individuals who are seeking to purchase vehicles in the near future.
Meat prices are soaring as well. According to the government’s Consumer Price Index, the price
of meat, poultry, and fish has all risen almost 12%. The price of beef has increased even further,
soaring over 20%. 4 The rise of meat is primarily due to the increased price for labor,
transportation, warehousing, packaging, and grains, which are key steps in breeding and
delivering meat. The situation is especially stressful for American families on Thanksgiving
week, as families are spending more money on grocery stores during the family reunion season.
Computer price is up 25% compared to 2020 due to chip shortage. 5 Normally, it is unusual to see
computer prices increase because of hardware. Moore’s law implies that as people obtain more
productivity in producing computer chips, computer hardware costs should be decreasing as the
economy of scale takes place. However, the global supply chain disruptions cause a sudden
shortage in chip prices that the economy of scale cannot compensate for. Although the supply
chain is recovering, automobiles and other products are all in need of chips to facilitate
production, which doesn’t stop the skyrocketing price.
The good news for customers is that not all industry has experienced a rise in the price level. For
example, medical care services have only experienced an inflation of 1.7%, and medical care
commodities have even experienced deflation of 0.4%. 6 The primary reason for the decreased
cost of healthcare is that the pandemic has prompted states to enforce policies supporting affordable healthcare. COVID-19 can be the trigger to make US healthcare more affordable,
more accessible, and more efficient for US families.
The rise of inflation has influenced all people including college undergraduates at Vanderbilt.
For example, at the start of the semester, Vanderbilt experienced a labor shortage in the campus
dining halls and offered $50 dining fees for a week. College undergraduates who are looking to
purchase a car or already rely on private cars for transportation also faced more economic
burdens due to increase transportation costs. On top of that, the rise in inflation influences the
stock and the bond market, which can influence the investment return of some young
Csreinicke. “If You Don’t Get a 6% Raise, Are You Taking a Pay Cut Due to Inflation? Here’s What Experts Say.” CNBC, CNBC, 20 Nov. 2021, https://www.cnbc.com/2021/11/20/is-not-getting-a-6percent-raise-amid-inflation-actually-taking-a-pay-cut.html.
Wiseman, Paul. “Explainer: Why Us Inflation Is so High, and When It May Ease.” AP NEWS, Associated Press, 11 Nov. 2021, https://apnews.com/article/why-is-us-inflation-so-high-77dc786442ccc3ed8092a7647716d682.
Routley, Nick. “U.S. Inflation: Which Categories Have Been Hit the Hardest?” Visual Capitalist, 19 Nov. 2021, https://www.visualcapitalist.com/u-s-inflation-which-categories-have-been-hit-the-hardest/.
Kate, Kate. “Meat Prices Are Soaring as Inflation Bites U.S. Consumers.” CBS News, CBS Interactive, 16 Nov. 2021, https://www.cbsnews.com/news/consumers-paying-higher-meat-costs/.
Ehling, Jeff. “Computer Chip Shortage Sparks Tech Delays and Higher Prices.” ABC13 Houston, KTRK-TV, 9 Apr. 2021, https://abc13.com/computer-chip-graphics-card-shortage-price-increase/10498066/.