As the year comes to a close, inflation data brings cheer to both the economy and holiday festivities.
Inflation, which is the rate at which prices for goods and services rise, has been relatively low in the U.S. recently. According to data released by the Bureau of Labor Statistics, the year-over-year inflation rate has been under four percent for the past three years, with the rate even dropping to below two percent twice during that period.
The main factor behind this low inflation rate is the Federal Reserve’s decision to keep interest rates at historic lows. This has led to a significant increase in purchasing power as incomes have grown faster than consumer prices, allowing individuals to buy more goods and services for their money.
The impact of low inflation was evident this holiday season with consumers taking full advantage of low prices. A number of retailers ran sale events during Black Friday and Cyber Monday, with many companies offering discounts of up to 70 percent.
These discounts were a great boon for shoppers, as they allowed them to buy more for the same amount of money. In addition, many stores offered gift cards and other incentives for those taking part in their events.
The lower prices are also a great help to the economy. Low inflation tends to encourage consumer spending as individuals feel more confident about buying items. This, in turn, spurs growth in the economy as businesses sold more of their products.
Inflation data showing little sign of increasing will also help the economy continue to grow as it enters a new year. Christmas sales and other holiday cheer can provide a much needed boost to the economy after the pandemic has caused so much disruption to businesses and people.
At the same time, low inflation is allowing households to save more of their money. This could be beneficial in 2021 if the country experiences an economic downturn, as households would be able to use their savings to help them get through the tough times.
Overall, inflation numbers bring holiday cheer as we head into the New Year. Lower consumer prices are allowing individuals to buy more with their money and stores to offer attractive discounts to customers. This, in turn, is helping to boost the economy and potentially giving households more financial security if the economy experiences a downturn.
