Cost of Living Increase in 2022

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The seasonally adjusted CPI (consumer price index) from October 2020 to October 2021 for all items for the U.S. city average in the U.S. is increased by 6.24%. This is a very rapid increase. The CPI from December 2019 to December 2020 increased by 1.30%. The average (mean) of December-to-December annual CPI increase between 2011 and 2020 is 1.58%. It is clear that inflation is taking place at a fast pace. We will look more detail into some of the notable industries and see how it is going to affect the cost of living increase in 2022.

Overall Inflation

First, the seasonally adjusted U.S. city average CPI increase for November 2018 to November 2019 is 2.04% and the same month for 2020 to 2021 is 6.88% [1]. As you can see, the CPI from November 2019 to November 2020 rose lower than the same time a year ago but it did not fall. The sharp rise took place at the beginning of 2021. The seasonally adjusted month-to-month CPI change is also strong in the majority of 2021, close to 1% at the highest point. The seasonally adjusted negative CPI growth is observed only from March 2020 to May 2020. The following months are all positive growth. The overall cost of living increase in 2022 is expected to continue.

Period CPI All Items Y-to-Y change %
Nov-18 – Nov-19 2.04%
Nov-19 – Nov-20 1.14%
Nov-20 – Nov-21 6.88%

Cost of Groceries Increase

The cost of food is experiencing a steady rise. The CPI for food between November 2020 and November 2021 is increased by 5.83% [1]. The annual CPI increase for food and beverages was moderate pre-pandemic. Most of the months in the second half of 2021 experienced a month-to-month CPI increase of more than 0.5%.

Period CPI food & beverages Y-to-Y change %
Nov-18 – Nov-19 1.93%
Nov-19 – Nov-20 3.68%
Nov-20 – Nov-21 5.83%

Cost of Rent Increase

The cost of rent for rental housing never experienced negative growth during the pandemic. The sharp month-to-month rent increase of above 0.4% a month since September 2021 [1]. The month-to-month CPI growth slowed down a little with the growth rate between 0.08% and 0.17% for June 2020 to January 2021. The year-over-year CPI of rent is increased by 3.05%. However, this is all nationwide housing market combined and varies drastically depending on the market. For example, New York City’s average rent in January 2021is dropped to $1565 from $1980 in January 2020. Then it went back up to $2089 in December 2021 [3].

The nationwide vacancy rate for the months right before the pandemic is around 6% and hit the peak of 7.1% in March 2020 [2]. Then it followed the decreasing trend until it hit the bottom at 3.8% in August 2021 and currently following an uptick trend [2]. The vacancy rate in December 2021 is 4.3%.

Period CPI rent Y-to-Y change %
Nov-18 – Nov-19 3.67%
Nov-19 – Nov-20 2.46%
Nov-20 – Nov-21 3.05%

Cost of House Increase

The year-over-year CPI for home sales has been increasing consistently with the rate of 3.53% from November 2020 to 2021. The existing home sales in November 2021 increased 1.9% from the previous month with the seasonally adjusted annual rate of 6.46 million sales per year [5]. But the existing home sales in November 2021 fell 2.0% from the same month a year ago (6.59 million in November 2020) [4]. Despite the increasing home sales price, the National Association of Realtors (NAR) Housing Affordability Index remains higher than the historic average [6][7]. The housing affordability index in November 2021 is 147.8, down from 168.7 same time a year ago [8].

The supply of new homes inventory in the 3Q 2021 is 6.1 months of sales at the current sales pace, greater than the same quarter last year (3.5 months) [9]. The supply of existing homes inventory in 3Q 2021 is a 2.4-month supply of homes for sale at the current pace, down from 2.7 months in the same quarter last year [9]. The Cost Of Living Increase in 2022 for the housing sector is expected to continue throughout the year.

Period CPI All Items Y-to-Y change %
Nov-18 – Nov-19 3.26%
Nov-19 – Nov-20 2.28%
Nov-20 – Nov-21 3.53%
HUD-Homeownership-Affordability

Cost of Electricity Increase

In this paragraph, the background of electricity use associated with the cost will be discussed. Similarly, the electricity used in the U.S. in 2020 is 3.717 billion MWh (Megawatt hour), dropped to the lowest since 2012 [10]. The electricity use in the United States in 2021 is expected to be higher. The electricity use from year-to-date until October is higher than that in 2020 [10]. The U.S. national average electricity rate started to increase around the beginning of 2021. This could be caused by the increased cost of electricity generation sources. Currently, 60.8% of U.S. electricity is generated by fossil fuels [11]. Natural gas electricity generation accounts for 40.5% of all electricity generation [11]. There is a strong relationship between the electricity rate and the cost of natural gas. Both are the upward trend in 2021.

Period CPI All Items Y-to-Y change %
Nov-18 – Nov-19 0.22%
Nov-19 – Nov-20 1.45%
Nov-20 – Nov-21 6.46%
natural gas vs electricity rate 1-2017-10-2021

Cost of Apparel Increase

This is one of the few sectors that did not experience a sharp price increase during pandemics. The price of apparel is, although it is catching up, still below the pandemic level. The apparel sector is one of the biggest hit by the impact of pandemics since the local government ordered to close the stores. Although the CPI for the apparel sector is still lower than the pre-pandemic level, it is on the increasing trend and might catch up sometime in the near future.

Period CPI All Items Y-to-Y change %
Nov-18 – Nov-19 -1.41%
Nov-19 – Nov-20 -5.14%
Nov-20 – Nov-21 4.97%
Cost of Increase Apparel Chart M-to-M 1 2018-2021

References
1. Consumer Price Index (CPI) Databases
U.S. BUREAU OF LABOR STATISTICS

2. Apartment List National Rent Report, January 6, 2022
apartmentlist.com

3. Data & Rent Estimates – City Level Historic Estimates
apartmentlist.com

4. Existing-Home Sales November 2021
National Association of REALTORS

5. Newsroom Existing-Home Sales Continue Upward, Increasing 1.9% in November
National Association of REALTORS

6. Housing Market Indicators Monthly Update December 2021
Office of Policy Development and Research
U.S. Department of Housing and Urban Development

7. National Housing Market Indicators
Office of Policy Development and Research
U.S. Department of Housing and Urban Development

8. Housing Affordability Index
National Association Of Realtors

9. HUD PD&R National Housing Market Summary
U.S. Department of Housing and Urban Development
Office of Policy Development and Research

10. Sales (consumption), revenue, prices & customers
ELECTRICITY
U.S. Energy Information Administration

11. What is U.S. electricity generation by energy source?
FREQUENTLY ASKED QUESTIONS (FAQS)
U.S. Energy Information Administration

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Cost Of Living Increase in 2019

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