 WED, JUN 16, 2021 
Last month, the U.S. consumer price index, a survey of a variety of goods, rose 5% compared with a year ago. The gain was a bit more than anticipated and the largest increase since the summer of 2008, according to the Labor Department.
That has Wall Street buzzing about what inflation means for markets and the economy. But what does it mean for, you know, normal people? Mostly, higher prices.
But first, it's important to understand what inflation is and where it comes from. Essentially, inflation is the rise in prices you'll pay for goods and services, which impacts your purchasing power. You'll have to spend more to get the same things. Some level of inflation — around 2% — is normal.
"While inflation has a negative connotation for many people, inflation itself isn't inherently good or bad," says Jill Fopiano, president and CEO of O'Brien Wealth Partners. "Some level of inflation is a sign that the economy is healthy."
Inflation is a feature of economic recovery. In the U.S. right now, it's being driven by a few overlapping factors resulting from the Covid-19 pandemic: low interest rates set by the Federal Reserve, several rounds of direct government stimulus to both individuals and businesses, and pent-up consumer demand that is being unleashed as the U.S. reopens. All of this has led to demand outpacing supply, causing shortages and price spikes in categories of goods including semiconductor chips, used cars and housing, among others.
"It was just 12 short months ago that many were afraid to even emerge from their homes," says Deron McCoy, chief investment officer at investment advisory firm SEIA. Meaning: People weren't spending, but now they plan to make up for lost time, as we discussed a few weeks ago.
With that in mind, many economists and other financial experts say that the current inflation is nothing to worry about — it's temporary and expected, even if it is unclear when it will eventually fade. And today's increase is nothing compared with the 1970s, when several unique shocks caused inflation to hit double digits, says McCoy.
However, there will be sticker shock this summer, says McCoy, as supply chains catch up with consumer needs post-pandemic.
For the time being, inflation will cost you: Consumers can expect to pay more for cars, clothing, furniture, travel and more in the months to come. To learn about the other effects on your pocketbook and investment portfolio, read more here.
If you have questions or concerns, or just want to say hi, you can email me at alicia.adamczyk@nbcuni.com, or find me on Twitter, @AliciaAdamczyk. Have a friend who might appreciate this type of content? Please forward it along!  More Articles from Make It
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