Inflation Jumps to 8.5% in March, Fastest Climb in 40 YearsAn ongoing storm of supply chain constraints, consumer demand and overseas conflict is causing inflation to rise at the fastest rate since 1981.
Inflationhas been steadily increasing for months, but as of March itjumped8.5% from a year ago — the fastest increase in 40 years, with a jump of 1.2% from February to March — the largest month-to-month leap in 17 years.
Ongoing supply chain constraints, increasing consumer demand and tensions between Russia and Ukraine intensified an already steady increase in the cost of living, with the Labor Departmentreportingon Tuesday that the consumer price index (CPI) has now hit record highs.
The acceleration was most notably heightened by the cost of gasoline, which jumped to 18.3%last month, accounting for more than half of the overall rise in prices. The surge in oil prices might be the indicator of the effect of the Russia and Ukraine conflict on the U.S. economy.
Related:What the Invasion of Ukraine Really Means for Business
As inflation rises, many Americans are waving goodbye to whatever wage gains they've seen over the past year. According to theDepartment of Labor, real average hourly earnings decreased 2.7 percent, seasonally adjusted, from March 2021 to March 2022.
The rising cost of, well, everything, is further intensifying the already prevalent labor shortage and supply chain crisis — variables that will directly affect small business owners first and hardest.
With inflation being the biggest problem for small businesses, and quality labor being the second, business owners are faced with a major challenge in balancing increased wages to incentivize workers and keeping prices competitive while overall costs skyrocket.
According to the National Federation of Independent Business' Small Business Optimism Index for March, thepercentageof small business owners expecting better conditions within the next six monthsdecreasedby 14 points — the lowest score ever reported in the survey's 48-year history.
Related:4 Ways to Protect Your Business From Inflation
The Federal Reserve is also tasked with balancing if it can successfully keep inflation at bay without prompting a recession. The Fed ispositionedto raise interest rates by 0.5% at its next meeting (double theMarch rate), as an assertive approach to steadying inflation.
Fed chair Jerome Powell hasremained optimisticregarding its ability to get inflation under control without causing economic collapse. "All signs are that this is a strong economy, and one that will be able to flourish in the face of less accommodative monetary policy," Powell told reporters at the Fed meeting in March.
The next policy meeting is in May.
