SAN DIEGO — Between rising inflation and soaring housing costs, San Diegans certainly felt the pinch last year when it comes to the cost of living. So what will the new year bring?
“We may have some difficulties early in the year, but I think things will improve as the year goes on,” said Dr. Alan Gin, Economics Professor at the University of San Diego.
He projects a reduced level of inflation by the end of the year
“The latest reports show that prices were up 6.8%. I project that we’ll probably be in about the 3.5% range in 2022,” said Dr. Gin.
While he foresees major progress by the end of this year, he said that labor shortages will continue to be a factor.
“A whole bunch of people retired, more than were expected. We’ve lost a lot of people to COVID, either they’ve died or they’re COVID long haulers and they can’t work anymore, so that’s creating labor shortages,” said Dr. Gin. “As a result of that, businesses have to pay higher wages to attract workers, and eventually, those higher wages will translate into higher prices where products are concerned.”
We’ve seen higher prices in grocery stores with certain foods being heavily impacted by the labor shortages and supply chain issues.
“Meat, fish, poultry, and eggs are up about 13%. Beef is up over 20% compared to last year, and one big factor was the pandemic impacting the meat processing industry,” said Dr. Gin.
Housing prices have continued to rise throughout the pandemic, and mortgage rates have stayed low throughout 2021.
“I think housing prices will be higher but I don’t think they’re going to be increasing at the same rate,” said Dr. Gin. “I think the Federal Reserve is going to increase interest rates. It’s been mentioned that they’re probably going to increase it twice in 2022, which will then dissuade some people from entering the housing market.”
With the world economy rebounding from pandemic lockdowns, the demand for oil has gone up, and so have prices at the pump.
“People are traveling more and businesses are operating,” said Dr. Gin. “And it turns out that the supply has not kept up with that increased demand.”
Starting in January, OPEC is increasing oil production by 400,000 barrels per day. This increase in supply could help to keep gas prices from rising much higher.
And though we’ve faced major supply chain issues since the pandemic began, according to Dr. Gin, the outlook for this next year is not so bad.
“I think things are starting to sort themselves out and I think things will get back closer to normal as far as the supply chain is concerned,” said Dr. Gin. “Every once in a while, we’ll get a hiccup and there will be some shortages of products which will cause prices to rise in those areas.”
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