Why Some Prices Are ‘Sticky’ at High Levels, While Others Fall
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Here's your Money Briefing for Monday, October 3rd. I'm J.R. Whelan for The Wall Street Journal. High inflation is still putting the squeeze on household budgets, though it has ticked a bit lower in recent months. And while some prices have come down, others are more stubborn, more sticky at those high levels.
The really tricky thing about sticky inflation is that it makes it really hard for people to plan for the future.
On today's show, we'll talk with our personal finance reporter, Julia Carpenter, about which products and services tend to have sticky prices and why some stay high while others drop. That's after the break.
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If you want to be price conscious when inflation's at 40-year highs, that might mean carefully planning out a grocery run or getting a haircut to stay within your budget. And while some prices have come down a bit, others have risen and now seem stuck there. WSJ personal finance reporter Julia Carpenter has been researching which prices tend to be sticky like that and how consumers can work that into their budget plans. Julia, thank you very much for being here.
Thank you for having me.
You know, Julia, we hear a lot of government economic statistics, but I don't think a lot of people have heard the term sticky before as it pertains to prices. Is that really a real term?
It's a real term. And the reason we say sticky is because we mean that prices go up or go down and then take much longer to move. They're not as fluctuating as other prices. And the Federal Reserve Bank of Atlanta actually measures a sticky price consumer price index. That's their economic indicator that can help gauge which costs in your life might stay high for months to come.
All right. So what are some examples of prices that tend to rise and stick at a higher level?
Right. These are things like rent, which I think a lot of people understand because you sign your contract for rent at the beginning of your lease and you can sort of expect it to stay constant. But there's also things like household furnishings, baby clothes, public transportation, medical care, all of these things. rise and then stay there. So don't expect the price of a haircut to come down anytime soon. That price has risen 4.4% from a year ago and it's unlikely to drop anytime soon. Same with car repairs. Those prices have risen 11% and they're likely to remain high for the coming months. You know, and also alcohol is on that list as well. People might notice that when they go to the liquor store, they might see that these prices have risen and they are not as slow to drop as other things.
Now, to be sure, we've seen some prices rise and stay elevated even before the current inflationary period that we're in. But how has the price movement been different in this current economy?
I spoke with the Atlanta Fed and I spoke with an economist there named Brett Meyer. And he said that one thing we're seeing during the pandemic is that those set of sticky prices, we've seen them increase much more rapidly and behave with much more volatility than they would outside the pandemic.
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