There’s a reason you could buy a car at the turn of the century for about $700, but a new one today will set you back, on average, somewhere north of $32,000. And no, you can’t blame it all on technology or materials or the cost of labor, although all of those do a play a role in rising prices.
Instead, the major factor in the increasing price of cars (and everything else for that matter) can be summed up in one word: inflation. It’s a complex economic concept, but inflation basically means that, over time, prices go up and money’s purchasing power goes down.
How much more will inflation cost you in 2015? Money Talks News finance expert Stacy Johnson has a breakdown in the video below. Watch what Stacy has to say, and then keep scrolling to see the numbers in black and white.
There isn’t much good about recessions, but they do often keep inflation rates low. The Great Recession has been no exception, with the overall inflation rate remaining relatively flat in recent years.
In December, the Federal Reserve downgraded its inflation forecast for 2015 and is predicting that overall inflation will fall somewhere between a mere 1 to 1.6 percent for the year. Originally, the Fed had said it thought inflation would be between 1.6 and 1.9 percent in 2015.
Food prices will go a little higher
While the Federal Reserve’s inflation prediction can provide a good barometer for the overall state of the economy, not every sector grows at the same rate.
For example, food is one area expected to see price increases higher than the overall inflation rate. The Economic Research Service in the U.S. Department of Agriculture calculates an annual food price inflation, and it estimates supermarket food prices will rise 2 to 3 percent in 2015.
However, some categories of food may see prices rise more than others during the coming year.
- Pork, beef and veal — 4.5 to 5.5 percent.
- Poultry, fresh fruits and dairy products — 2.5 to 3.5 percent.
- Fresh vegetables — 2 to 3 percent.
- Sugar and sweets — 1.5 to 2.5 percent.
- Eggs — 1 to 2 percent.
- Cereal and bakery products — 0.5 to 1.5 percent.
Nothing but good news when it comes to oil
One of the few areas that has recently experienced deflation – falling prices – is oil. Thanks to a combination of global factors and domestic production, we’ve been able to fill up our tanks at prices we haven’t seen since 2009.
In 2015, the price at the pump may increase from recent lows, but the good news should continue through the new year. As of this writing, the U.S. Energy Information Administration is predicting WTI crude oil will cost $62.75 a barrel in 2015, which could result in gasoline selling for a nationwide average of $2.60 a gallon.
There’s also good news if you use heating oil to warm your house. The administration estimates the price should drop from an average of $3.70 a gallon in 2014 to $2.96 a gallon in 2015.
College degrees will cost more in 2015
If you or your child is hitting the books in pursuit of a degree, expect to see a larger tuition bill this year.
According to the College Board, for-profit institutions will have the smallest average tuition increases, while students at private nonprofits will experience the most sticker shock. Here’s the breakdown of the average increases for the 2015-2016 school year:
- For-profit schools — 1.3 percent.
- Public four-year schools (in-state tuition) — 2.9 percent.
- Public four-year schools (out-of-state tuition) — 3.3 percent.
- Public two-year schools (in-district tuition) — 3.3 percent.
- Private, nonprofit four-year schools — 3.7 percent.
Room and board charges will also be going up an average of 2.2 to 3.4 percent, depending on the type of institution.
Get ready for higher health care costs
Each year, PwC (formerly known as PricewaterhouseCoopers) projects a medical cost trend for the year. In 2015, it says that trend will be 6.8 percent.
The medical cost trend represents the overall growth of the health sector, and it could mean you’ll see the price of your medications and medical services increase.
While the medical cost trend anticipates higher health care expenses for the year, it doesn’t necessarily mean your health insurance premiums will be rising 6.8 percent. To get a better idea of what’s happening to premiums prices, PwC reviewed state data for individual health insurance plans.
As of November 2014, more than a dozen states had made final rate approvals for plans being offered to their residents for 2015. Among those states, the average increase in premium prices is 3.7 percent. Meanwhile, when all other states were added to the mix, the average increase jumped to 5.4 percent.
While those increases aren’t too bad overall, price changes vary significantly by state, which means not everyone is getting off easy. Pity the poor Alaskans, who are experiencing an average 32 percent increase in their premiums this year.
As a whole, the 2015 inflation forecast is positive for consumers. While the nation’s economic growth has been slow until recently, the silver lining is steady prices on most of what you buy.
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