Inflation has been the main focus of global, state, and local economies as prices for goods and services have increased steadily over the past year.

Central College Associate Dean for Curriculum and Faculty Development Brian Peterson has been studying and teaching about economics since 1996, and says inflation is defined as a sustained increase of prices purchased regularly, mainly measured in the United States by the Consumer Price Index, which is what the Bureau of Labor determines what a typical family of four would consume in a set period of time, and then tracks the change in prices of those goods.

Peterson says this round of inflation is atypical, and hasn’t been this high for nearly 40 years. He believes the cause is from multiple factors, coming from a “perfect economic storm” that started with supply chain issues resulting from waves of unusual shortages of production and spikes in demand since the onset of the COVID-19 pandemic in 2020.

“There’s been a lot of conversation about the disruptions to the supply chain, so if there are fewer goods that you’re able to purchase, people will start to bid up the prices on those particular goods,” he says. “You’re seeing that in a number of different ways — if you look at some new car dealerships, you won’t see very many new cars because they’re having difficult bringing them in, but what you also see if you go to a used car lots is that they can’t keep them on the lot fast enough, and so that’s causing an increase in the cost of those vehicles.”

Peterson says another issue stems from a lagging impact of government spending in response to the COVID-19 pandemic from Congress and both Presidential administrations dating back to the first bills that were approved.

“So all of the economic income payments that we’ve received in the last year-and-a-half, if there weren’t an opportunity for people to utilize those funds or purchase then, now that more and more people are coming out of hiding now that the pandemic seems to be receding just a little bit, that’s going to increase pressure.”

Lastly, Peterson attributes the increase to overall economic growth, a need for workers, and increased wages, in part due to the “Great Resignation,” as many people already employed in 2020 went to find new opportunities following the shutdowns and remote working and telecommuting enhanced as part of the response to the pandemic.

“For you, it means more income in your pocket, so you’re going to start spending more, but then the company has to figure out a way to recoup the additional raise they gave you, which means they’re going to start raising the prices on what they sell,” he says. “So you’re seeing multiple things coming together and leading to an increase in price.”

Hear more from Peterson about the economy and inflation on an upcoming edition of In Depth with Dr. Bob Leonard.