What is Year over Year inflation and How Does it Impact Prices?

16 Jan, 2023 0 comments
What is Year over Year inflation and How Does it Impact Prices?

Understanding Year over Year inflation: Definition and Calculation

Inflation is a measure of the rate at which prices for goods and services are rising. It is often reported as an annual percentage increase. Inflation can be measured using a variety of indexes, such as the Consumer Price Index (CPI) or the Producer Price Index (PPI). One way to measure inflation is by looking at the inflation rate year over year, also known as YoY inflation.

Year over Year inflation compares the current price level to the same period the previous year. For example, if the inflation rate for December 2022 was 6.5% in the United States, that means that the overall level of prices for goods and services in December 2022 was 6.5% higher than it was in December 2022.

YoY inflation is a useful way to measure inflation because it helps to adjust for seasonal fluctuations and gives a more accurate picture of the overall trend in prices.

2022 has seen the highest inflation rate in the United States since the 80s.

Year over Year inflation in the US, Europe and world

Inflation rate year over year

The following data shows the inflation rate year over year in the United States, Europen Union and worldwide since 2000. Data from 1960 can be found on worlddata website.

YearUnited States of AmericaEuropean Union World
20214.70 %2.55 %3.50 %
20201.23 %0.50 %1.92 %
20191.81 %1.63 %2.19 %
20182.44 %1.74 %2.44 %
20172.13 %1.43 %2.19 %
20161.26 %0.18 %1.55 %
20150.12 %-0.06 %1.43 %
20141.62 %0.20 %2.35 %
20131.46 %1.22 %2.62 %
20122.07 %2.66 %3.73 %
20113.16 %3.29 %4.82 %
20101.64 %1.53 %3.35 %
2009-0.36 %0.84 %2.94 %
20083.84 %4.16 %8.95 %
20072.85 %2.51 %4.82 %
20063.23 %2.67 %4.28 %
20053.39 %2.49 %4.11 %
20042.68 %2.29 %3.38 %
20032.27 %2.09 %3.03 %
20021.59 %2.42 %2.83 %
20012.83 %3.37 %3.84 %
20003.38 %3.15 %3.49 %

Inflation rates year over year for consumer goods in the US

Inflation rates year over year for consumer goods in the US

Inflation rates year over year for food and energy

Inflation rates year over year for food and energy

The Effects of Year over Year Inflation on Consumer Prices

Inflation has a direct impact on consumer prices. As the overall level of prices rises, so do the prices of individual goods and services. This means that as YoY inflation increases, consumers will have to pay more for the same items they purchased the previous year.

High inflation can be particularly difficult for low-income households, as it can make it harder for them to afford basic necessities. It can also make it harder for businesses to plan for the future, as they may not know how much they will have to charge for their products.

How Year over Year inflation Impacts the Economy and Interest Rates?

Inflation also has an impact on the economy as a whole. High inflation can be a sign of a strong economy, as it often accompanies strong economic growth.

However, if inflation gets too high, it can lead to economic instability and even recession. In addition, high inflation can also lead to higher interest rates, as the Federal Reserve may raise rates to try to slow down inflation. Higher interest rates can make it more expensive for businesses and consumers to borrow money, which can slow down economic growth.

How to counter inflation and protect your purchasing power?

As an individual, there are a few strategies you can use to counter inflation and protect your purchasing power.

  • Invest in assets that tend to appreciate in value, such as stocks or real estate.
  • Save and invest in assets that generate income, such as bonds or dividend-paying stocks.
  • Focus on increasing your earning potential through education, skills development or career advancement.
  • Look for ways to cut expenses, such as reducing debt and finding ways to save on everyday purchases.
  • Hedge your savings against inflation by keeping a portion of your savings in assets that are not correlated with inflation such as gold or art.

You can see this period as an opportunity to start your investing journey. This blog has many educational contents you can start with:

Conclusion on the inflation rate in 2022

Inflation can have a significant impact on our personal finances, but there are ways to protect ourselves against it. By investing in assets that tend to appreciate in value, generating income, increasing our earning potential, cutting expenses, and hedging our savings, we can help preserve our purchasing power. It’s important to stay informed about inflation and its effects on the economy, and make adjustments to our financial strategies as necessary.

It’s also worth noting that inflation can vary year to year, so while this year might have been tough, there’s always hope that next year will be different. It’s always good to stay positive and have a plan in place for any economic scenario.

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