Estimate the Impact of Inflation

Consumer spending is governed by a variety of influences, each impacting families in different ways.  Budgeting for future purchases takes wide-ranging factors into account, including personal income, existing debt, investment performance and even the inflated costs of consumer goods in the future.

Inflation calculator helps track the rising cost of goods, furnishing accurate looks at consumer purchasing power over time.  The calculator looks at the average inflation percentages for the years 1913-2013, allowing users to enter various years to see how inflation impacts spending in major economic sectors like the automobile and housing industries.  Family planning benefits from a close look at inflation and essential related features.

Purchasing Power

Several indexes are used to evaluate and express the rate of inflation, but what it really comes down to for everyday consumers is how much they can buy with their money. Purchasing power refers to just that, illustrating what can be bought with a single unit of currency, within any independent economy.  In its simplest terms, shoppers identify inflation at the grocery store, as prices steadily rise.  Because other influences also exact their tolls, which portion of an individual item's price increase can be attributed to inflation is hard to judge.  But when ticket totals are higher in general, one can assume some level of inflation contributed to the rising costs.

Just as inflation causes prices to rise, individual purchasing power has the ability to grow on its own. If income rises at a faster rate than inflation elevates prices, individual purchasing power is not impacted negatively.  And purchasing power also relates to services provided by individuals, so the ability to influence others' actions also declines alongside one's ability to buy services.

Consumer Price Index

In order to measure the cost of consumer goods, the CPI, or consumer price index, looks at a sampling of widely-used goods and services, with particular emphasis placed on price changes across items.  The general CPI designates place-holders within consumer purchasing sectors, evaluating their prices at regular intervals.  The exercise illuminates pricing trends and furnishes a valuable economic indicator, used to measure inflation.

In addition to broad analysis, indexes look at specific spending segments, to compare trends in different parts of the economy.  Major purchases, for example, might be isolated in indexes for cars, electronics, or home renovation services.  As each area of spending is plugged in to the general CPI, results are weighted to construct the big picture.  On their own though, individual indexes provide valuable information for evaluating past pricing trends, as well as setting the stage for prudent individual planning.

Supply and Demand

A variety of economic factors are at play influencing inflation rates, leading to various theories about what really drives rates upward.  Supply and demand is a fundamental economic principle that must be accounted for when analyzing pricing trends and affordability indexes.

The general principle dictates that free-market economies reach balancing points when demand for goods is equal to available supplies, creating balance in the way particular goods are priced. Since precise balance is not often achieved within competitive markets, the prices of goods and services are continually subject to change, which must be accounted for when making inflation assumptions.