Is Inflation About to Peak?

When it comes to roller coasters, we have a ride twice family rule. The first time you ride a roller coaster you just want off and you promise yourself you will never get back on. But I’m always challenging my kids and when they want to ride a new roller coaster, they know they must ride it back-to-back because the second time isn’t nearly as scary as the first time because you know where the peaks and drops are.

Inflation is still really high, and everyone keeps talking about it. It’s affecting all of us because it’s so widespread. Last week’s inflation report saw consumer prices up 8.5% from the same time last year, the most in nearly forty years. How high will it get? Will it ever stop? There are many questions, but I do see some possible clues that the tide is turning.

I see three clues that inflation might be near a peak.

Clue number one is the auto industry. The supply chain and chip shortage made it so difficult to find a new car that used car and truck prices skyrocketed. Just two months ago the price of a used car was almost 45% hirer than the year before according to the Manheim Used Car Value Index, but now it’s ‘only’ 24.8%. Still high but not as high as it was. I like the downward trend.

Clue number two is gasoline. This clue is a stretch but I’m trying to be optimistic. The price of oil has fallen to $104 a barrel, down from a peak of $124 on March 8 according to Yahoo Finance. Thankfully, gas prices have followed oil prices down as well. The U.S. average price of $4.10 is down from $4.34 in early March, per Hopefully, gas prices will continue to come down and be more reasonable. But, and this is a big but, if Europe stops importing Russian oil and natural gas energy prices could escalate quickly.

The third clue inflation might be near a peak is the shipping mess at our ports is getting worked out. The major west coast ports of Los Angeles and Long Beach, which are responsible for unloading nearly half of all imports to the US, are seeing their backlogs drop. In early April, there were a total of 37 ships lined up for both the ports of Los Angeles and Long Beach, down from 65 in September 2021 and 109 in January 2022, according to the Business Insider. This helps shipping prices as well. Shipping rates from Shanghai, China to Los Angeles or New York are down 28% on average from the highest point last year according to LPL Financial Research.

Prices have a long way to fall to make much of a difference and it won’t happen overnight, but inflation could possibly be near its peak. Some prices will stay high permanently because of labor costs but many will come down. I don’t have a crystal ball, but I do see a trend downward and I hope it continues.

There is one exception to the family ride twice rule with roller coasters and that would be my wife. She hates roller coasters, and is a scaredy-cat, but gets to do whatever she wants. She prefers staying on level ground, she’s sort of anti-peak. When it comes to inflation, I think we all prefer level ground too.

Have a blessed week!

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