It’s the Prices, Stupid!

Photo credit: greggavedon.com via Flickr (CC BY-ND 2.0)
Photo credit: greggavedon.com via Flickr (CC BY-ND 2.0)

In May, U.S. producers reported their largest price increases in over two years, marking an end for the brief reprieve consumers have enjoyed since late last year.  Food and gas prices are spiking, according to CNBC:

Last month, gasoline prices surged 17 percent, the largest increase since August 2009. Food prices rose 0.8 percent in May, the biggest gain in just over a year, snapping five straight months of declines.

Bad news for anyone who eats or drives, but why are prices suddenly on an upward trend after an almost year-long downward slide?  The cause, apparently, is a strong dollar:

A sharp decline in crude oil prices since last year and a strong dollar have weighed on producer prices. While rising oil prices are easing some of the downward pressure on inflation, the upward trend in producer prices will be gradual because of the dollar’s strength.

“…because of the dollar’s strength.”  This hits the nail right on the head.  A strong national currency means that prices for everyday items will fall to lower levels, or at least rise more slowly.  This means lot to the working families whose wages haven’t kept up with rising costs in decades.  In the 2012 election, rising prices virtually tied with unemployment for the top concern on voters’ minds (38-37%).  This isn’t a big surprise, since their take home pay has dropped almost a quarter since 2008.  Voters next year are going to be looking for someone to address the rising cost of living, and the candidate who can tackle that problem with a strong monetary policy proposal could go far in 2016.

Nick Arnold is a researcher for American Principles in Action.