The BLS released August inflation report, let’s take a look:
The Consumer Price Index for All Urban Consumers (CPI-U) rose 0.1 percent in August on a seasonally adjusted basis after being unchanged in July, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 8.3 percent before seasonal adjustment. Increases in the shelter, food, and medical care indexes were the largest of many contributors to the broad-based monthly all items increase. These increases were mostly offset by a 10.6-percent decline in the gasoline index. The food index continued to rise, increasing 0.8 percent over the month as the food at home index rose 0.7 percent. The energy index fell 5.0 percent over the month as the gasoline index declined, but the electricity and natural gas indexes increased.
It is a bit shocking that even though energy fell 5 percent that inflation is still running at 8.3 percent. To put this into perspective, a person earning $100,000 per year just lost $8,300 in purchasing power and this problem has been ongoing now for some time.
If we end up with another year of 8 percent inflation or even slightly lower, that will have been an erosion of $16,000 in purchasing power over two years.
Sadly, there doesn’t appear to be a plan in place to address this other than the Fed raising rates which doesn’t appear to be helping the situation. While we have been investing in small batches of dividend stocks, it is becoming clear that those investments won’t be enough. Our hope now is to see bond rates shoot up and invest in high yielding bonds but we’ll need for rates to rise a bit higher.
In the meantime, stay tuned and stay solvent…