Leading Retail Economist Sounds a Warning for People Worried About Inflation
- Inflation has been rampant since mid-2021.
- The omicron variant could send inflation levels up even higher for one big reason.
Inflation is bad -- and it could get worse before it gets better.
It's hardly a secret that it's gotten way more expensive just to function these days. Everything from gas to groceries to utilities costs more than usual, and we can thank inflation for that.
To be clear, inflation isn't a new concept; it's natural for the cost of goods to rise over time. The problem, however, is that inflation levels have jumped substantially in a relatively short period of time, leaving consumers on the hook for much higher costs than their paychecks can easily handle. In fact, right now, those living paycheck to paycheck without money in savings risk landing in serious debt just to make ends meet.
Now at some point, inflation levels are apt to start declining. But that may not happen for quite some time. In fact, the National Retail Federation's Chief Economist, Jack Kleinhenz, recently sounded a warning about inflation -- that things will get worse before they improve.
Why inflation levels could continue to spike
A big reason the cost of consumer goods has risen is that the demand for them has outpaced supply. Now, when we dig a little deeper, it's easy to make the argument that rampant inflation is actually a sign of a healthy economy because it signifies that consumers finally have more money to spend and simply need more products to spend it on.
The problem, however, is that those living paycheck to paycheck can't easily absorb an uptick in expenses the way higher earners or well-off people can. And so a lot of people are hurting financially right now, despite the economy being pretty strong.
Meanwhile, in case you hadn't noticed, there's a pesky little coronavirus variant called omicron that's been fueling a surge in cases. Kleinhenz thinks the current COVID situation will lead to an uptick in people staying home and spending more money on goods, as opposed to in-person entertainment. That could, in turn, put even more pressure on supply chains and create a wider supply-demand gap. The result? Higher prices.
Of course, the good news in all of this is that so far, omicron hasn't resulted in any of the extreme economic shutdowns we saw early on in the pandemic. Widespread unemployment may be less of a concern as the country grapples with the ongoing outbreak. But if Kleinhenz is correct and inflation rises even more, a lot of people are apt to land in serious financial trouble in the near term.
How to fight inflation
If inflation has been upending your finances, there are a few ways to combat it. First, get on a budget. Doing so should help you track your spending and identify ways to trim your costs.
Next, look at boosting your income with a second job. If you're able to earn an extra $50 a week with a side hustle, it may do the trick in helping you cover your expenses without having to dip into your savings or carry balances on credit cards.
And speaking of credit cards, be selective with the ones you use. If you're spending more than ever on basics like gas and groceries, you should be using cards that offer the most rewards and cash back for those purchases.
At some point, the cost of consumer goods is bound to start shrinking. But it's important to prepare for the fact that prices may not have reached their peak, and to take steps to combat inflation as best as possible.
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