Sticker Shock

Note: The price tags on the pictures throughout the story show how the cost of items changed from May 2021 to May 2022, unadjusted for season.

Note: The price tags on the pictures throughout the story show how the cost of items changed from May 2021 to May 2022, unadjusted for season.

During your back-to-school shopping, did you notice that everything from jeans to notebooks was more expensive? So are groceries, gas, housing, and even haircuts.

Over the past year, the cost of goods and services in the United States has soared. Bryson Nowakowski, 11, has felt the effects firsthand. This past spring, the sixth-grader from Bradenton, Florida, was saving up for a new baseball bat. The one he wanted typically costs $200 to $250.

Bryson had saved about $150 when he checked to see if the bat was on sale. That’s when he got a big surprise: The price had jumped to $350. 

“I was like, What? ” recalls Bryson. “It used to be way cheaper. I was pretty mad.”

When the price of nearly everything we buy rises, it’s called inflation. A 2 percent inflation rate is considered normal in the U.S. (At that rate, a $10 T-shirt increases in cost by about 20 cents a year.) But prices have been climbing much higher and faster than usual. 

This past spring, inflation in the U.S. reached a 40-year high. From May 2021 to May 2022, prices at stores leaped by 8.6 percent. Read on to find out why this happened and when costs are expected to return to normal.

During your back-to-school shopping, did you notice that everything from jeans to notebooks was more expensive? So are groceries, gas, housing, and even haircuts.

Over the past year, the cost of goods and services in the United States has soared. Bryson Nowakowski, 11, has felt the effects firsthand. Bryson is a sixth-grader from Bradenton, Florida. This past spring, he was saving up for a new baseball bat. The one he wanted usually costs $200 to $250.

Bryson had saved about $150. So he checked to see if the bat was on sale. That is when he got a big surprise. The price had jumped to $350.

“I was like, What?” recalls Bryson. “It used to be way cheaper. I was pretty mad.”

When the price of nearly everything we buy rises, it is called inflation. A 2 percent inflation rate is considered normal in the U.S. (At that rate, a $10 T-shirt increases in cost by about 20 cents a year.) But prices have been climbing much higher and faster than usual.

This past spring, inflation in the U.S. reached a 40-year high. From May 2021 to May 2022, prices at stores leaped by 8.6 percent. Read on to learn why this happened. And find out when costs are expected to return to normal.

The problem began with the Covid-19 pandemic, which started taking a toll on the U.S. in early 2020. Remember having to wait months to get a new bike or video game? That happened because the pandemic disrupted the global supply chain. Factories slowed or stopped production because workers were sick. As a result, companies had trouble making and delivering products. 

At the same time, Americans who were staying home to avoid getting sick began buying more. When goods or services are in high demand but short supply, companies often raise prices. (This principle is known as supply and demand.) Despite cost increases, many people didn’t start slowing their spending until this past summer. 

Lastly, the rising price of oil has added to the problem. Oil is used to make, power, and transport many products—so when it gets more expensive, those goods do too. 

Oil prices have increased because demand is high and supply is low. (Oil companies began producing less during the pandemic, when people cut back on driving and flying.) In addition, the global oil market was disrupted in February, when Russia invaded Ukraine, starting a war in that European nation. To punish Russia, a major oil producer, the U.S. and the European Union decided to ban most Russian oil. That reduced oil availability even more. 

The problem began with the Covid-19 pandemic, which started to affect the U.S. in early 2020. Remember having to wait months to get a new bike or video game? That happened because the pandemic upset the global supply chain. Workers got sick, so factories slowed or stopped production. That made it hard for companies to make and deliver products.

At the same time, many Americans were staying home to avoid getting sick. They began buying more. When goods or services are in high demand but short supply, companies often raise prices. (This principle is known as supply and demand.) Costs went up. But many people did not start to slow their spending until this past summer.

Lastly, the rising price of oil has added to the problem. Oil is used to make, power, and transport many products. So when it gets more expensive, those goods do too.

Oil prices have increased because demand is high and supply is low. (People cut back on driving and flying during the pandemic. So oil companies began producing less.) In addition, the global oil market was upset in February. That is when Russia invaded Ukraine, starting a war in that European nation. To punish Russia, the U.S. and the European Union decided to ban most Russian oil. That reduced oil availability even more, because Russia is a major oil producer.

Gasoline, which is made from oil, has seen the biggest increase. Between April 2020 and April 2022, a gallon of gas more than doubled in price. 

That spike hit people in the U.S. in two ways. First, they had to pay more to fill their cars with gas. Second, many businesses raised the prices of their products to cover their own increased transportation costs. 

Grocery prices have also seen big jumps. Why? “Large amounts of oil and natural gas go into fertilizers and pesticides that are used to produce and protect grains, vegetables, and fruits,” explains Veronika Dolar. She is an economics professor at the State University of New York at Old Westbury on Long Island in New York. And since grain is needed to feed cattle and other farm animals, the price of meat has increased too.  

If your school cafeteria has cut back on burgers, it may be because the price of ground beef has shot up more than 13 percent since last year! 

Gasoline is made from oil. It has seen the biggest increase: Between April 2020 and April 2022, a gallon of gas more than doubled in price.

That spike hit people in the U.S. in two ways. First, they had to pay more to fill their cars with gas. Second, many businesses raised the prices of their products to cover their own increased transportation costs.

Grocery prices have also seen big jumps. Why? “Large amounts of oil and natural gas go into fertilizers and pesticides that are used to produce and protect grains, vegetables, and fruits,” explains Veronika Dolar. She is an economics professor at the State University of New York at Old Westbury on Long Island in New York. Grain is also needed to feed cattle and other farm animals. So the price of meat has increased too.

Has your school cafeteria cut back on burgers? It may be because the price of ground beef has shot up more than 13 percent since last year!

Essentially, our money doesn’t go as far as it once did. In 2021, the average U.S. household was projected to spend around $3,500 more than it did in 2019 and in 2020 to pay for the same goods and services. 

People’s paychecks are not rising as much as prices are. That means Americans need to stretch their dollars further. Walmart, the nation’s largest food retailer, reports that its shoppers are buying cheaper store-brand items rather than pricier alternatives. They are also reaching for half gallons of milk rather than full gallons. 

Essentially, our money does not go as far as it once did. In 2021, the average U.S. household was projected to spend around $3,500 more than it did in 2019 and in 2020 to pay for the same goods and services.

People’s paychecks are not rising as much as prices are. That means Americans need to stretch their dollars further. Walmart is the nation’s largest food retailer. It reports that its shoppers are buying cheaper store-brand items instead of pricier alternatives. They are also reaching for half gallons of milk instead of full gallons.

Low-income households have been especially hurt because they were already spending most of their money on food and other necessities before prices went up. Adding to the crunch: the cost to rent housing has also increased.

People “are having to decide between buying food for their children . . . or paying rent,” Dana Karni of Lone Star Legal Aid in Houston, Texas, told reporters. “And that’s a real tight squeeze.” 

Low-income households have been especially hurt. That is because they were already spending most of their money on food and other necessities before prices went up. Adding to the crunch: The cost to rent housing has also gone up.

People “are having to decide between buying food for their children . . . or paying rent,” Dana Karni told reporters. She is with Lone Star Legal Aid in Houston, Texas. “And that’s a real tight squeeze.”

“When there’s a lot of inflation, you want to cool the economy down,” says Dolar. “You want to cut down the demand.” 

One way to decrease demand is to make borrowing money more expensive. To do that, the government can raise the rates of interest—the fee you pay when you borrow money. These rates are largely determined by a government agency called the Federal Reserve. 

Last June, the Fed—as it is often called—made the largest single increase to interest rates in nearly three decades. U.S. officials hope the increase, which also affects credit card rates, will encourage some people to hold off on making big purchases. 

“When there’s a lot of inflation, you want to cool the economy down,” says Dolar. “You want to cut down the demand.”

One way to decrease demand is to make borrowing money more expensive. To do that, the government can raise the rates of interest. That is the fee you pay when you borrow money. Such rates are largely determined by the Federal Reserve, a government agency, often called the Fed.

Last June, the Fed made the largest single increase to interest rates in nearly three decades. The increase also affects credit card rates. U.S. officials hope the increase will encourage some people to hold off on making big purchases.

Hopefully not. The Federal Reserve will likely continue to slowly raise interest rates as needed until demand for goods and services cools. Once that happens, supply will increase and prices should level off. 

As of early June, some financial experts were predicting that inflation in the U.S. could drop to about 3 percent next year as supply chains get back to normal. That much lower rate would help prices come back down too, they explain. At the same time, Dolar says, people’s paychecks may rise. 

“Typically, what happens is that prices go up and eventually wages or salaries come up as well,” says Dolar. “Then we’re able to buy the same amount of stuff as before.” 

That might be a good argument to make the next time you ask for a raise in your allowance!

Hopefully not. The Federal Reserve will likely continue to slowly raise interest rates as needed. They will do this until demand for goods and services cools. Then supply will increase and prices should level off.

As of early June, some financial experts were predicting that inflation in the U.S. could drop to about 3 percent next year as supply chains get back to normal. That much lower rate would help prices come back down too, they explain. At the same time, people’s paychecks may rise, Dolar says.

“Typically, what happens is that prices go up and eventually wages or salaries come up as well,” says Dolar. “Then we’re able to buy the same amount of stuff as before.”

That might be a good argument to make the next time you ask for a raise in your allowance!