As we reach the end of 2020, economists around the world are breathing a collective sigh of relief. The latest inflation data has been released and it appears that economic activity is on the rise. This data is welcome news and could potentially bring some much-needed holiday cheer to those affected by the global pandemic and economic downturn of the past year.
Inflation is an important economic indicator because it measures the overall increase in prices of goods and services in an economy. When inflation is low, it typically means that an economy is healthier since consumers have more purchasing power. This month’s inflation data showed that the Consumer Price Index (CPI) decreased by 0.1% in October, which is the lowest level it has been in six months.
The good news doesn’t stop there. The Producer Price Index (PPI) was also surprisingly good. The PPI measures the increase in the prices that producers are charging for goods and services. This monthly data shows that the PPI decreased by 0.8%. This drop is the largest rate of decrease since early 2018 and indicates that producers are beginning to feel more comfortable in the market and thus have been able to keep their prices lower.
The welcome decrease in inflation is great news for both consumers and producers. Consumers can look forward to potentially lower prices in the future while producers can relieve some of the financial pressures they’ve faced this year. It also serves as hope that the economic picture could get brighter heading into 2021.
In the face of this good economic news, it is a reminder to take a step back and be grateful for what we have this holiday season. As we move into 2021, let’s hope that the latest inflation data is just the beginning of an even more prosperous year ahead.