Inflation Watch: Inflation Ticks Up to 3%

Inflation is a hot topic of conversation. The past few years, consumers have been digging even deeper into their pockets for everything from groceries and car insurance to rent and mortgage payments. 

There’s good news and bad news. The good news is, inflation seems to be settling around 3%. Prices rose 3% over the 12 months ending in January, according to the monthly Consumer Price Index released by the U.S. Bureau of Labor Statistics. What else makes this so special? The fact that inflation decreased from 9% to 3% in a few years without causing a major recession, for one thing. 

Some costs are, of course, still high. Housing, for example, is up 4.4% year-over-year this month. And, inflation has crept up from a post-pandemic era low of 2.4% in September. 

Although there’s no promise of an easy solution for combatting every aspect of inflation, the tool economists and savvy penny hoarders alike use for watching its ebb and flow can be explained along with what it means for the average person and how it changed this month.

Ease Inflation Woes By Making Easy Money

The inflation roller coaster is a ride we all want to be done with. Sometimes it feels like there’s not much we can do when prices jump. If your budget is majorly stretched, we have a few ways to help. Check out some of our favorite ways you can earn easy money so you can make back what inflation is eating into.

Offer	What You Can Earn	What You Have to Do	Take Action
InboxDollars	$225/month	Complete short surveys	Complete Surveys
Solitaire Cash	Up to $83 per win	Compete against other players	Download Here
FreeCash	$1,000/month	Simple online tasks	Get Started
GoBranded	Up to $140/month	Share your honest opinion	Start Sharing
Kashkick	$1,000/month	Try out apps	Register Now

What is the CPI?

If you’ve never heard of it, the Consumer Price Index is a monthly report released by the U.S. Bureau of Labor Statistics. It provides a snapshot of critical areas of inflation as they relate to what people buy on a regular basis.

“The CPI covers basic goods we need, like food and energy, plus other items we spend money on, especially services that involve labor costs, like home repairs and personal care,” said Joe Camberato, CEO of NationalBusinessCapital.com. “When the CPI goes up, especially in areas like dining out and services, it means our expenses are increasing, which can affect how much we can buy with our money.”

So how does the BLS get this information?

Each month, the BLS gathers a sample of data from 75 urban locations across the country. It includes 80,000 price quotes from some 22,000 retail and service providers and 6,000 housing units. The data isn’t perfect and notably leaves out numbers from more rural locations. However, the BLS estimates these numbers reflect pricing increases and decreases for 93% of the U.S. population in categories like food, housing, energy and medical care.

More From The Penny Hoarder: Ditch Overpriced Car Insurance Now — Save $500 Today With The Penny Hoarder’s New Tool

Why Does the CPI Matter?

The CPI is a useful tool for understanding what aspects of daily expenses are getting more (or less) expensive. It can come in handy when trying to optimize budgets, investments and saving strategies. 

“Consumers can use the CPI to determine and plan for how their cost of living is going to change over time,” said Cliff Ambrose, founder and wealth manager at Apex Wealth. “By tracking CPI trends, they can adjust their budgets accordingly and anticipate changes in expenses for essentials like housing, groceries and health care.”

Understanding the CPI won’t just help with budgeting. It also may provide clues as to how and where to invest discretionary income. 

“If CPI reports indicate rising inflation, consumers may consider investing in assets that typically outperform during inflationary periods, such as real estate, commodities or Treasury Inflation-Protected Securities (TIPS),” Ambrose said. “Additionally, they may want to negotiate fixed-rate contracts or consider refinancing debt to lock in lower interest rates.”

Now, let’s dive into this month’s CPI report.

What Went Up:

Each month, the CPI report reflects data gathered from the previous month. The latest CPI report, which came out in February, reflects survey results for January. Here’s what went up: 

• The CPI as a whole increased in January: The Consumer Price Index for All Urban Consumers (CPI-U) increased in January by 0.5% after also increasing in December. Despite this increase, inflation remains right at 3%.
• Food: The food index as a whole increased by 0.4% in January after increasing by 0.3% in December. This index is further broken down into food-at-home, which increased by 0.5%, and food away from home, which also rose 0.2%. 
• Housing: The index for shelter continued to rise in January, increasing by 0.4%. This is part of a bigger trend: The shelter index rose 4.4% over the last year and reflects expenses for homeowners and renters alike. 
• Energy: The energy index as a whole increased in January, as did all of its sub-indexes. Gasoline and utility piped gas increased by 1.8%, while fuel oil, energy commodities, and energy services also increased by 6.2%, 1.9% and 0.3% respectively. Electricity remained unchanged for the month. 
• Commodities: In December, the index for commodities less food and energy commodities increased by 0.3%.  
• Transportation: The transportation index increased by 1.8%.. 
• Used vehicles: The index for used cars and trucks increased by 2.2%.

Other notable increases: The index for all items less food and energy rose 3.3% over the past 12 months. Other indexes with notable increases over the last year include education (up 3.8%), recreation (up 1.6%)and motor vehicle insurance (up 11.8%).

More From The Penny Hoarder: If You Have More Than $1,000 in Your Checking Account, Make These Money Moves

What Went Down:

Here are the categories of the CPI that have gone down in the past month: 

• Apparel: The apparel index decreased by 1.4%.

What Stayed the Same:

Here are the categories of the CPI that remained the same in the past month: 

• New vehicles: The index for new cars remained the same.
• Medical care commodities: The index for medical care services remained the same.

More From The Penny Hoarder: Can’t Tighten Your Budget Anymore? Make These 6 Money Moves

What This Means For You: 

Here are some insights into facing the inflation fluctuations this month.

Housing: Housing has been steadily rising all year for homeowners and renters.

• What this means: Put aside more money for your housing costs, especially if you have an adjustable-rate mortgage or plan on taking on a new mortgage or renewing your lease soon.

Food: Food has become increasingly more expensive over the past year — and went up 0.4% this month. 

• What this means: Be picky with how you grocery shop and when and where you dine out.

Car insurance: Car insurance accounts for one of the biggest CPI increases over the past 12 months — up 11.8%.

• What this means: If you’re in the market for a new car insurance policy, check out The Penny Hoarder’s tool for comparing your options.

More From The Penny Hoarder:

• Here’s How to Start Saving Money — Even If You Don’t Have Room in Your Budget
• 5 Strategies to Consolidate Your Credit Card Debt
• Our Top Picks for Best Savings Accounts

Larissa Runkle (@therealtorwriter) is a writer and editor living in Colorado. Her work focuses on personal finance, real estate copywriting, and lifestyle guides.