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If you've bought gas, a car or a BLT from Joe's recently, you already know that prices are rising.
The consumer price index (CPI), the government's main gauge of inflation, jumped 0.8 percent in April and 4.2 percent over the past year. It's the largest 12-month increase since the period ending September 2008. Low supply and high demand have combined to drive up prices on a variety of goods. Here's a closer look at 10 items that are seeing big cost increases this year.
1. Gasoline
The biggest headline-grabber is gas. The Bureau of Labor Statistics (BLS) says that its index of gasoline prices has jumped 49.6 percent over the past 12 months. A year ago, when the pandemic had many people staying home and off the road, a gallon of unleaded cost just $1.85, according to AAA. Today, it's averaging $3.01 per gallon.
Making matters worse, the hacking of the massive Colonial Pipeline has caused gas shortages up and down the East Coast. As of May 12, 28 percent of North Carolina stations had no gas. Compounding the problem, the trucking industry says it doesn't have enough drivers for the tanker trucks used to resupply stations and keep pumps flowing.
2. Oil
Demand for oil walked off a cliff last year as the economy shut down due to the pandemic. The price of a barrel of West Texas intermediate crude oil ended 2019 above $60. In April 2020, the price actually plunged below zero in an astonishing meltdown. Since then, prices have steadily increased as the industry struggles to keep up with growing demand as the economy reopens. Today, crude is again selling at pre-pandemic prices above $60 a barrel.
Prices could remain higher as the oil industry scrambles for workers, and that could take a while, because the industry needs skilled labor. “A lot of the people who lost their jobs were urban service workers,” says Michael Englund, chief economist for Action Economics. A waitress in the Bronx is unlikely to take a job at a fracking site in West Texas, he notes. Until production catches up with demand, gas prices, which are tied to oil prices, could remain high.
3. Used cars
The average cost of a used car zoomed to $25,463 in April, according to research firm J.D. Power — the first time the amount has risen above $25,000. Prices jumped 10 percent alone in April, the latest CPI report found, the largest monthly increase since the government started tracking used-car prices in 1953.
What's behind the price surge? A shortage of computer chips. Most cars use a number of semiconductors for everything from increasing engine performance to monitoring cabin temperature. A fire at a major Japanese chip plant and severe winter storms in Texas that disrupted domestic chip manufacturing suddenly made semiconductors a scarce commodity. With fewer new cars rolling off the assembly line, demand for used cars has skyrocketed.
4. Rental cars
As travel came to a halt early on in the pandemic, many rental car companies sold off parts of their fleets to raise much-needed cash. But now, as travel picks up and demand for rentals reemerges, the aforementioned shortage of chips needed to manufacture new cars has made it harder to restock rental fleets. As a result, the cost to rent a car or truck has soared 82 percent over the past year, according to the BLS.
If you can find a rental car, expect to pay much more than you're used to, especially if you don't plan ahead. Car rentals in Hawaii, for example, are above $200 a day, if you can find a car at all, according to Jonathan Weinberg, CEO of AutoSlash, a discount car-rental company. A recent study by CheapCarRental.net found rental car rates across the U.S. averaging about 30 percent higher than last May, while in Hawaii and Florida they're up by more than 50 percent.
5. Houses
After more than a year of working at home, many people have apparently decided that they would like to live elsewhere. The S&P CoreLogic 20-City Case-Shiller Composite index has gained 11.9 percent over the 12 months ending in February, the biggest jump since February 2006, near the height of the housing bubble. “These data remain consistent with the hypothesis that COVID has encouraged potential buyers to move from urban apartments to suburban homes,” says Craig J. Lazzara, Managing Director and Global Head of Index Investment Strategy at S&P DJI.
Anecdotally, agents and customers are reporting bidding wars that haven't been seen since the housing frenzy of the 2000s. “Here in Colorado, it's become the norm now to bid $100,000 over asking price on homes,” says Englund. “It's an incredible economic frenzy going on."
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6. Lumber
The National Association of Homebuilders estimates that lumber prices have tripled in the past 12 months, and that those increases have tacked on an extra $36,000 to the price of a new home. The rush of new home building — as well as renovation — during the pandemic accounts for rising demand for lumber.
Oddly, it's not a shortage of trees that's aggravating the price increases: It's reduced production at lumber mills. As with many businesses, mills cut production because of stay-at-home orders and social distancing mandates. Tariffs on Canadian lumber imports to the U.S. have also pushed up lumber prices, the NAHB says.
7. Copper
Sometimes called “the commodity with a PhD in economics” because of its price sensitivity to economic growth, a metric ton of copper now sells for nearly $10,500, up from about $5,000 just 12 months ago. China has ramped up demand as its economy rebounds from COVID-19, and the U.S. housing boom has boosted copper demand as well. And electric cars need lots of copper: While conventional cars have up to 49 pounds of copper, battery electric vehicles contain 183 pounds of copper.
On the production side, Chile is the world's largest copper producer, and copper miners at two Chilean mines — which account for 20 percent of the country's production — are threatening to strike. Even if the miners don't strike, it can take a long time to ramp up new production. And if a new source of copper is discovered, it takes years to get approval to open a new mine.
8. Airfares
Looking for bargain airfares? They are going to be much harder to find as pandemic restrictions ease and people start taking vaccination vacations. Although airfares are still below pre-pandemic levels, according to TravelWeekly, they are rising quickly. By May, budget domestic ticket prices will average $279, which would be 23 percent higher than May 2020 but 10 percent less than May 2019.
And be sure of the dates you want to fly. Many airlines waived their rebooking fees during the pandemic, but many are now reinstating them. And if you're leaving the country, expect to pay for COVID-19 testing, too.
9. Hotel rooms
You could get some great deals on hotel rooms during the pandemic, but those deals are getting harder to find now. According to a report from USA Today, hotel prices are just 5 percent below where they were a year ago. Rooms in vacation areas are above pre-COVID levels, as the newly vaccinated seize the opportunity to get out of the house and onto the beach.
Booking a vacation rental instead of a hotel room is becoming challenging as well due to booming demand. (Here are nine tips for finding a vacation rental if you can't find a hotel.)
10. Bacon
Apparently, bacon was one of the top comfort foods during the pandemic: Its price rose 10.7 percent over the past 12 months, according to the BLS. “Seventy percent of consumers report eating or preparing bacon at least once a month or more,” Tara-Ann Dugan, director of strategy and insights for the National Pork Board, said in a statement. “One of the fun dynamics that we've seen over the pandemic is that bacon love grew amongst millennials, where 75 percent of millennial consumers are eating or preparing bacon, versus the 70 percent of the general population."
John Waggoner covers all things financial for AARP, from budgeting and taxes to retirement planning and Social Security. Previously he was a reporter for Kiplinger's Personal Finance and USA Today and has written books on investing and the 2008 financial crisis. Waggoner's USA Today investing column ran in dozens of newspapers for 25 years.
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10 Things You Buy are Getting More Expensive - AARP
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