By definition, the Consumer Price Index (CPI) is a measure of the average change over time in the prices urban consumers pay for a basket of goods and services.
In simple terms, when the CPI goes up, it generally means our daily cost of living goes up The CPI offers a primary gauge of inflation. When the CPI rises, that indicates a decrease in the purchasing power of currency.
According to the U.S. Bureau of Labor Statistics, the CPI for All Urban Consumers (CPI-U) increased 0.4 percent in August on a seasonally adjusted basis after rising 0.6 percent in July. Over the past year, the all items index increased 1.3 percent before seasonal adjustment.
This is okay for the typical American worker —assuming you still have a job — because real average weekly earnings have kept pace. You didn’t fall behind. But you didn’t get ahead, either.
However, as the federal government continues to print money to battle the effects of the coronavirus pandemic — public debt now approaches $27 trillion — I expect the cost of living to go up at a much faster clip in certain areas of the economy.
We’re already seeing the cost of housing rise mostly due to low inventories and increasing costs of materials and labor for new construction. There are also a number of businesses that have effectively added a so-called COVID tax to their bills. While inflation remains in check for the moment, there’s a good possibility it soon will rear its ugly head
That begs the question: What can you do about it if the almighty dollar loses steam? The good news is there are a few things you can do, including purchasing investment real estate. It just might offer the hedge against inflation for which you’re looking. While inflation causes consumer goods to cost more, it also leads to increases in rent.
We can keep our fingers crossed the cost of living stays in check. But it’s better to be prepared just in case it doesn’t.