Inflation cooled ever so slightly in January with the CPI index being measured at a 6.4% increase. This was down from 6.5% in December.
This marked the seventh straight month that inflation has come down from its high point in June of 2022 at 9.1%. The problem is that the cooling trend is moderating.
CPI numbers track inflation on a year-over-year basis. In other words, the prices on a market basket of goods and services has increased 6.4% over the past year. If you look at it on a monthly basis, the CPI actually rose 0.5% between December and January.
Another problem in the reporting is that they don’t use the same basket of goods and services every month when creating the CPI numbers. The Labor Department has the ability to change the items used to compile the index at their will without notice.
A reasonable person would think they’d use the same goods and services every month to maintain the integrity of their reporting. But they actually have the ability to push the numbers in either direction, depending on what they choose.
I grow rather tired of government.
One thing is certain. The Fed isn’t going to stop raising interest rates any time soon. They won’t have a choice. Housing, food, and energy prices are exerting enormous pressures on overall price increases.
Let me leave you with this.
What does all of this mean? Please allow me to explain this in a different way.
Out of control inflation didn’t rear its ugly head until the new administration took power. If you take the buying power of $100 back roughly two years ago in February of 2021 and compare it to last month, you’d need $113.75 to purchase the same items.
In two short years we’ve had an average inflation increase of 13.75%. This means that if you haven’t raised your prices by that amount, you’re probably behind the curve.
Please don’t take that last statement as the gospel truth because individual circumstances are going to vary tremendously.
The price increases of the inputs used in your business from labor to whatever aren’t all going to follow the average. They could be much higher or lower.
You need to watch your numbers and don’t be afraid to raise your prices. Maintaining your margins through this nonsense is a difficult but necessary task.
But that’s the job. Like it or not, that’s what you signed on for. If entrepreneuring was easy, everyone would do it. In reality, few make the cut.
Look on the bright side. This inflation problem is only going to get worse in the near future.
We’re all going to get through this. Let’s get through it together.
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