The cost of consumer goods has risen and fallen over time—with the long-term trajectory for most items going up. That’s not a surprise to most people. You know the cost of bread or milk at the grocery store is more than it was when you were a kid. But how fast is the cost of consumer goods going up today, and what, exactly, is the consumer price index?
Find out more about CPI below—and get some current information about the cost of consumer goods in 2021 and whether prices are going up again soon.
- Is the cost of consumer goods increasing?
- Why are costs rising?
- What does a rising CPI mean for you?
Is the Cost of Consumer Goods Increasing?
Yes, the cost of consumer goods is increasing. It generally always has, but depending on various economic and market factors, there are times when costs increase faster than others.
In 1930, for example, the average cost of a loaf of bread was 9 cents. By 2008, the average cost was $2.79. In 2021, the average cost of a new home is forecasted to increase 8%, while the cost of a new car is forecasted to increase 5.4% and wages are forecasted to increase only 2.5%.
What Are Consumer Goods?
Consumer goods are the goods that are bought and used by consumers. That’s in comparison to goods that are bought and used by businesses and manufacturers.
Examples of consumer goods include groceries and clothing. But energy and fuel, such as the gas you put in your car, can also be considered consumer goods.
What Is the Consumer Price Index?
The consumer price index, or CPI, is a measurement of how much the overall cost of consumer goods goes up or down over a period of time.
The consumer price index in 1913 was 9.9. In 2020, the CPI was 258.8, reflecting just how much the average price of things has increased over the last century.
While the CPI has gone up over time, it doesn’t go up every year. From 1913 to 2020, there were 13 years when the CPI dropped at least a bit. Primarily, those were in years surrounding or following depressions or recessions, such as in 2009 following the Great Recession of 2008.
What Goods Are Included in the CPI?
While the CPI is calculated on a large amount of data, there are eight major categories of goods that are looked at. They include:
- Education and communication
- Food and beverages
- Medical care
- Other goods and services
Why Are Costs Rising?
Costs rise over time due to a variety of economic and market reasons, including consumer demand. When demand is strong and people are buying a lot of goods, businesses can charge more for those goods. They may also have to charge more because it costs them more to procure or produce the goods, since there are only so many resources to go around.
As manufacturers and others compete for those resources, which can include raw goods, skilled labor, and time, the cost of the resources goes up. Eventually, that increased cost gets passed on to the consumer.
That’s a big part of the rising cost of consumer goods in 2021. Prior to the pandemic in 2020, businesses often ate those costs because they needed to keep prices in the consumer markets lower to compete. But pandemic pricing changed some of that.
Consumer panic buying, chaotic logistics, supply chain management, and shortages of certain goods led to increased pricing as a natural economic reaction. Yet demand remained. That impact remains even after the pandemic, with companies no longer able or willing to take all the cost impact themselves.
Low inventories, higher demand, and resource issues have led companies, including Procter & Gamble and Coca-Cola, to announce price hikes for 2021. That’s on top of pricing that’s already increased. From April 2020 to April 2021, prices for the following categories increased:
- Grocery by 2.6%
- Household care by 5.2%
- Baby care by 7%
- General merchandise by 7.1%
What Does a Rising CPI Mean for You?
Rising CPI can mean you pay more for the goods you need, including food. Unfortunately, rising CPI doesn’t automatically mean rising pay rates, so many consumers have to figure out how to budget for these increasing prices given their current income.
For example, you may want to pay more attention to the costs of groceries to keep from going over budget at the register. It can also be a good idea to look for ways you can save money on other expenses, such as refinancing your mortgage if you have a good credit score. If you can get a lower interest rate or better terms, that could reduce how much you pay each month for your house—and leave you more disposable income for consumer goods.
Sign up for an account with Credit.com to understand where your credit stands first. Then, consider applying for credit cards, savings accounts, or a refinanced mortgage to help improve your buying power if you have good credit.
The cost of many consumer goods is going up in 2021. Historical evidence indicates that this will be an ongoing trend for the future, so it’s smart to prepare now.
DISCLAIMER. The information provided in this article does not, and is not intended to be, legal, financial or credit advice; instead, it is for general informational purposes only.