U.S. Inflation: Which Categories Have Been Hit the Hardest?
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U.S. Inflation: Which Categories Have Been Hit the Hardest?

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u.s. inflation 2021

The Briefing

  • The inflation rate in the U.S. has seen its fastest annual increase in over 30 years
  • Fuel, transportation, and meat products are seeing some of the steepest increases

Prices have been going up in a number of segments of the economy in recent months, and the public is taking notice. One indicator of this is that search interest for the term “inflation” is higher than at any point in the past decade.

inflation search interest

Recent data from the Bureau of Labor Statistics highlights rising costs across the board, and shows that specific sectors are experiencing rapid price increases this year.

Where is Inflation Hitting the Hardest?

Since 1996, the Federal Reserve has oriented its monetary policy around maintaining 2% inflation annually. For the most part, U.S. inflation over the past couple of decades has typically hovered within a percentage point or two of that target.

Right now, most price categories are exceeding that, some quite dramatically. Here’s how various categories of consumer spending have fared over the past 12 months:

CPI CategoryOne-Year Change
Energy commodities49.5%
Used cars and trucks26.4%
Energy services11.2%
New vehicles9.8%
Tobacco and smoking products8.5%
Food at home5.4%
Food away from home5.3%
Transportation services4.5%
Apparel4.3%
Shelter3.5%
Alcoholic beverages2.2%
Medical care services1.7%
Medical care commodities-0.4%

Of these top-level categories, fuel and transportation have clearly been the hardest hit.

Drilling further into the data reveals more nuanced stories as well. Below, we zoom in on five areas of consumer spending that are particularly hard-hit, how much prices have increased over the past year, and why prices are rising so fast:

1. Gasoline (+50%)

Consumers are reeling as prices at the gas pump are up more than a dollar per gallon over the previous year.

Simply put, rising demand and constrained global supply are resulting in higher prices. Even as prices have risen, U.S. oil production has seen a slow rebound from the pandemic, as American oil companies are wary of oversupplying the market.

Meanwhile, President Biden has identified inflation as a “top priority”, but there are limited tools at the government’s disposal to curb rising prices. For now, Biden has urged the Federal Trade Commission to examine what role energy companies are playing in rising gas prices.

2. Natural Gas (+28%)

Natural gas prices have risen for similar reasons as gasoline. Supply is slow to come back online, and oil and natural gas production in the Gulf of Mexico was adversely affected by Hurricane Ida in September.

Compared to the previous winter, households could see their heating bills jump as much as 54%. An estimated 60% of U.S. households heat their homes with fossil fuels, so rising prices will almost certainly have an effect on consumer spending during the holiday season.

3. Used Vehicles (+26%)

The global semiconductor crunch is causing chaos in a number of industries, but the automotive industry is uniquely impacted. Modern vehicles can contain well over a thousand chips, so constrained supply has hobbled production of nearly a million vehicles in the U.S. alone. This chip shortage is having a knock-on effect on the used vehicle market, which jumped by 26% in a single year. The rental car sector is also up by nearly 40% over the same period.

4. Meats (+15%)

Meat producers are facing a few headwinds, and the result is higher prices at the cash register for consumers. Transportation and fuel costs are factoring into rising prices. Constrained labor availability is also an issue for the industry, which was exacerbated by COVID-19 measures. As a top-level category, inflation is high, but in specific animal product categories, such as uncooked beef and bacon, inflation rates have reached double digits over the past 12 months.

5. Furniture and Bedding (+12%)

This category is being influenced by a few factors. The spike in lumber prices along with other raw materials earlier in the year has had obvious impacts. Materials aside, actually shipping these cumbersome goods has been a challenge due to global supply chain issues such a port back-ups.

How Inflation Could Influence Consumer Spending

Rising prices inevitably impact the economy as consumers adjust their buying habits.

According to a recent survey, 88% of Americans say they are concerned about U.S. inflation. Here are the top five areas where consumers plan to cut back on their spending:

Money saving action% of respondents
Cut back on restaurant / take-out meals48%
Keep my current technology (e.g. phone, tablet) instead of upgrading30%
Budget food and cut back on grocery buying29%
Purchase less clothing / accessories29%
Put off home repairs, renovations, or home upgrades23%

Will Inflation Continue to Rise in 2022?

Many experts believe that U.S. inflation will decelerate going into 2022, though there’s no consensus on the matter.

Improved semiconductor supply and an easing of port congestion around the world could help slow inflation down if nothing goes seriously wrong. That said, if the last few years are any indication, unexpected events could shift the situation at any time.

For the near term, consumers will need to adjust to the sticker shock.

Where does this data come from?

Source: U.S. Bureau of Labor Statistics – Consumer Price Index (November 10, 2021)
Data Note: The Consumer Price Index (CPI) measures the change in prices paid by consumers for goods and services. The CPI reflects spending patterns for each of two population groups: all urban consumers and
urban wage earners and clerical workers, which represent about 93% of the total U.S. population. CPIs are based on prices of food, clothing, shelter, fuels, transportation, doctors’ and dentists’ services, drugs, and other goods and services that people buy for day-to-day living.

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The Decline of U.S. Car Production

U.S. car production has been in a long-term downward trend since the 1970s. We examine some of the factors driving this trend.

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The Briefing

  • U.S. auto manufacturing has been in a downward trend since the 1970s
  • Overseas competitors have gradually eroded the market share of America’s Big Three
  • Recent events like the global chip shortage present further setbacks

U.S. Car Production Falls to a New Low

Germany may have been the birthplace of the automobile, but it was America that developed the methods for mass production.

Created in 1913, Henry Ford’s assembly line greatly reduced the time it took to build a car. This also made cars more affordable, and America’s automotive industry quickly became the largest in the world. As we can see in the chart above, this dominance wouldn’t last forever.

From a high of nearly 10 million cars per month in the 1970s, the U.S. produced just 1.4 million in June 2021. Here are some reasons for why the country produces a fraction of the cars it used to.

Global Competition

America’s Big Three (Ford, GM, and Chrysler*) have been unable to defend their market share from overseas competitors. The following table shows how Honda and Toyota were able to break into the U.S. market over a span of just five decades.

YearFordGMChryslerBig Three
Total Market Share
HondaToyota
196029.3%45.7%10.4%85.4%--
197028.3%38.9%14.9%82.1%-2.0%
198020.5%44.2%9.1%73.8%3.3%6.2%
199023.8%35.2%12.0%71.0%6.0%7.6%
200022.6%28.0%13.0%63.6%6.5%9.1%
201016.4%18.8%9.2%44.4%10.5%15.0%

*Chrysler is now a part of Stellantis N.V., a multinational corporation.
Source: WardsAuto

The 1970s presented an incredible opportunity for Honda and Toyota, which at the time were known for producing smaller, more fuel-efficient cars.

First was the Clean Air Act of 1970, which imposed limits on the amount of emissions a car could produce. Then came the 1973 oil crisis, which caused a massive spike in gasoline prices.

As consumers switched to smaller cars, American brands struggled to compete. For example, the flawed design of the Ford Pinto (Ford’s first subcompact car) was exposed in 1972 after one exploded in a rear-end collision. The ensuing lawsuit, Grimshaw v. Ford Motor Company, undoubtedly left a stain on the automaker’s reputation.

Production Moves to Mexico

2018 was a controversial year for GM as it came under fire by the Trump administration for closing four of its U.S. plants. That same year, GM became Mexico’s biggest automaker.

The decision to outsource is well-founded from a business standpoint. Mexico offers cheaper labor, lower taxes, and close proximity for logistics. Altogether, these benefits add up to roughly $1,200 in savings per car.

It’s important to note that GM isn’t alone in this decision. BMW, Ford, and many others have also invested in Mexico to produce cars destined for the United States.

Shifts in the Market

There are other, less obvious factors to consider too.

Modern cars are much more reliable, meaning Americans don’t need to purchase a new one as often. 2020 marks four consecutive years of increase for the average vehicle age in the U.S., which now sits at 12 years old.

“In the mid-’90s, 100,000 miles was about all you would get out of a vehicle. Now, at a 100,000 miles a vehicle is just getting broken in.”
– Todd Campau, Associate Director, IHS Markit

Rising car prices could also be playing a part. The average price of a new car was $41,000 as of July 2021, up from around $35,700 in May 2018.

Can U.S. Car Production Make a Comeback?

Recent events are a grim reminder of the direction U.S. car production is heading.

As part of its plant closures, GM shuttered its Lordstown facility in 2019. This broke a 2008 agreement in which GM pledged to keep 3,700 employees at the location through 2028. The company had received over $60 million in tax credits as part of this deal, and $28 million was ordered to be paid back.

COVID-19 has presented further issues, such as the ongoing chip shortage which has impacted the production of more than 1 million U.S.-made vehicles.

Not all hope is lost, however.

Tesla now employs over 70,000 Americans across its production facilities in California, Nevada, New York, and soon, Texas. The company is joined by Lucid Motors and Rivian, two entrants into the EV industry that have both opened U.S. plants in 2021.

Where does this data come from?

Source: Trading Economics

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After China’s Crypto Ban, Who Leads in Bitcoin Mining?

In September 2021, China issued a blanket ban on all crypto activities. Click to find out which country is the new leader in bitcoin mining. (Sponsored Content)

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The Briefing

  • China issued a ban on all crypto activities in September 2021
  • As a result, the U.S. has greatly increased its share of global Bitcoin hash rate

Bitcoin Mining Moves to America

Bitcoin mining is a process that verifies transactions on the blockchain ledger, while also bringing new bitcoins into circulation.

To be successful at this, cryptominers require vast amounts of computing power, meaning electricity becomes one of their most significant costs. This pushes them to locate wherever electricity is cheapest.

For years, China was the optimal location—the country has an abundance of cheap, coal-powered electricity. However, in September 2021, the Chinese government issued a blanket ban on all crypto activities.

In this graphic sponsored by Global X ETFs, we illustrate a movement that’s being dubbed “the great mining migration”.

Bitcoin Hashrate by Country

The University of Cambridge maintains various datasets on the Bitcoin blockchain, including power consumption and hash rate. Global hash rate measures the total computational power that is dedicated to mining.

The table below shows a breakdown of global hashrate by country.

CountryShare of Global Hash rate
as of September 2019 (%)
Share of Global Hash rate
as of August 2021 (%)
🇺🇸 U.S.4.1%35.4%
🇰🇿 Kazakhstan1.4%18.1%
🌎 Other6.1%13.5%
🇷🇺 Russia5.9%11.2%
🇨🇦 Canada1.1%9.6%
🇲🇾 Malaysia3.3%4.6%
🇩🇪 Germany0.9%4.5%
🇮🇷 Iran1.7%3.1%
🇨🇳 China75.5%0.0%

This data shows us how dramatic the shift has been. Just two years ago, China accounted for over three quarters of global Bitcoin hashrate. The country is now expected to miss out on $6 billion in annual cryptomining revenues.

The New Bitcoin Capital of the World

So why are cryptominers choosing the U.S. as their new home? For starters, America offers a greater level of relative stability.

If you’re looking to relocate hundreds of millions of dollars of miners out of China, you want to make sure you have geographic, political, and jurisdictional stability.
– Darin Feinstein, Founder, Core Scientific

Within the U.S., Texas is one of the hottest spots for cryptominers to relocate. The state not only has plenty of open land, but also a deregulated power grid. This allows cryptominers to negotiate rates with different power providers and sign longer-term contracts.

According to Square, cryptomining has environmental benefits, too. The financial services company believes that bitcoin mining is in fact a complementary technology for clean energy production and storage.

Where does this data come from?

Source: University of Cambridge

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