Stimulus Update: Yet Another Indicator Shows That Inflation Could Still Be With Us for a While

This post may contain affiliate links which may compensate us based on your interaction. Please read the disclosures for more information.

Consumers may be in for a longer stretch of higher costs. 

Last week, the Consumer Price Index, which measures changes in the cost of consumer goods, rose 0.5% from December to January. And that was a piece of jarring news in its own right.

But now, another measure of inflation is telling us that the problem of higher living costs is not about to go away. And that means consumers could see their credit card balances climb in the coming months as they struggle to make ends meet.

Businesses are paying more for goods

In January, the Producer Price Index, which measures what suppliers are charging businesses, rose 0.7% from December. That increase represents the largest monthly gain since June of 2022.

When it costs businesses more money to procure inventory, they tend to pass that cost along to consumers. And so a higher reading from the Producer Price Index means that in the coming months, consumers might end up paying more for everything from groceries to apparel to household goods. And that’s clearly not a great thing given how so many people have been struggling for over a year.

Will stimulus aid come to the rescue?

Last year, a number of states dipped into their budgets and issued stimulus funds to residents to help them cope with inflation. But there was no aid to be had from the federal government.

Even though the problem of inflation still very much exists, at this point, we shouldn’t expect lawmakers at the federal level to send stimulus checks into Americans’ bank accounts. For one thing, stimulus aid is really only justifiable when the broad economy needs a boost. But the fact that inflation is soaring is actually an indication that the economy is healthy, even though that may seem counterintuitive.

The whole reason inflation is surging is that the demand for consumer goods has outpaced the available supply. And strong demand for goods indicates that consumers have money to spend. As such, we’re unlikely to see a federal stimulus round go out anytime soon.

In fact, a round of stimulus checks is apt to only make the problem of inflation worse. For living costs to come down, consumers need to cut back on spending to some degree — enough to narrow the gap between supply and demand. But if they’re given an extra payday, they’re likely to go out and spend that money rather than save it, thereby extending the problem of inflation.

So where does that leave those people who are barely scraping by right now due to inflation? Unfortunately, in a pretty bad spot. But all isn’t lost.

Today’s labor market is nice and robust, and jobs are plentiful. Those struggling to keep up with their bills can try to seek out better-paying jobs to make their expenses more manageable. The gig economy is booming, too, so there’s plenty of opportunity to pick up work on the side of a main job.

This isn’t to say that juggling a second job, or a series of gigs, is an easy thing to do. But unfortunately, it looks like inflation isn’t slowing down. So for the time being, cash-strapped consumers may need to be willing to sacrifice more of their downtime to stay afloat financially.

Alert: highest cash back card we’ve seen now has 0% intro APR until 2024

If you’re using the wrong credit or debit card, it could be costing you serious money. Our experts love this top pick, which features a 0% intro APR until 2024, an insane cash back rate of up to 5%, and all somehow for no annual fee.

In fact, this card is so good that our experts even use it personally. Click here to read our full review for free and apply in just 2 minutes.

Read our free review

We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

 Read More