Two Simple Price Inflation Indexes
and the Prime Interest Rate
Copyright © January 9, 2008 and January 2, 2024 by Robert Wayne Atkins, P.E.
All Rights Reserved.
Price Inflation Index for Foods with a Long Shelf Life
The government of the USA intentionally omits food prices and energy prices (gasoline, diesel, heating oil) from the official inflation indexes that they report to the citizens of the USA.
However, food is one of the major reoccurring expense items of most normal families. Therefore it would be useful if there was an inflation index that was only based on the changes in food prices.
On January 9, 2008 the total cost of 60 different food items in a traditional one-year emergency food supply was recorded. The price data was gathered in the Southeastern United States.
Since 2008 the prices of the original 60 food items have been monitored and the change in the total cost of the one-year emergency food supply is shown in the following table.
Most of the foods in the one-year emergency food supply have shelf lives of at least one-year, and many of the foods have shelf lives that exceed five years.
| Year | Starting Prices | Ending Prices | Inflation for 1 Year | Inflation Since 2008 |
| 2008 | $1,385 | $1,597 | +15.3% | 15.3% |
| 2009 | $1,597 | $1,694 | +6.1% | 22.3% |
| 2010 | $1,694 | $1,768 | +4.4% | 27.7% |
| 2011 | $1,768 | $1,933 | +9.3% | 39.6% |
| 2012 | $1,933 | $1,930 | -0.2% | 39.4% |
| 2013 | $1,930 | $1,958 | +1.4% | 41.4% |
| 2014 | $1,958 | $1,941 | -0.9% | 40.2% |
| 2015 | $1,941 | $1,944 | +0.2% | 40.4% |
| 2016 | $1,944 | $1,865 | -4.1% | 34.7% |
| 2017 | $1,865 | $1,859 | -0.3% | 34.2% |
| 2018 | $1,859 | $1,867 | +0.4% | 34.8% |
| 2019 | $1,867 | $1,904 | +2.0% | 37.5% |
| 2020 | $1,904 | $1,934 | +1.6% | 39.6% |
| 2021 | $1,934 | $2,104 | +8.8% | 51.9% |
| 2022 | $2,104 | $2,552 | +21.3% | 84.3% |
| 2023 | $2,552 | $2,707 | +6.1% | 95.5% |
During the year 2023 the price of 30 different foods increased by an average of 21.6% per food item.
During the year 2023 the price of 10 different foods decreased by an average of 11.8% per food item.
During the year 2023 the price of 20 different foods did not change.
The net impact on all 60 foods was an increase of 6.1% in the price of a one-year emergency food supply for one person.
Summary:
In four years from the beginning of 2017 to the beginning of 2021 when Donald Trump was President of the USA food prices increased a total of 3.7% or an average of 0.9% per year.
In three years from the beginning of 2021 to the beginning of 2024 while Joe Biden has been President of the USA food prices have increased a total of 40.0% or an average of 10.0% per year.
Perhaps we should all make tentative plans for food prices to continue to increase during 2024.
Price Inflation Index for Fuel and Fresh Food
In addition to the change in the prices of food with long shelf lives, it would also be useful to determine how the price of fuel and fresh food was changing on a yearly basis. Therefore the following four items are being monitored in addition to the 60 food items in the above food inflation index:
- Gasoline: Most of us in the United States who still have jobs depend on gasoline in one way or another to get us to and from work. If gasoline begins to significantly increase then it will take a bigger bite out of our already very small paychecks, and that will mean that most of us will have less money available to pay our other bills. Those of us on fixed incomes will therefore be forced to figure out how we can either reduce those other bills or eliminate them, such as eating less each day or cancelling our cable TV service.
- Diesel Fuel: The things we buy are moved around the world and around our nation in vehicles that use diesel fuel. If the price of diesel fuel increases significantly then this will directly impact the delivered cost of almost everything we buy. All the major freight companies, including FedEx and UPS, already have a fuel surcharge as part of their published rate structures. This means that any and all increases in the price of diesel fuel will be immediately transferred to the delivered cost of the products we purchase. The impact of that increase will depend on the price of the product in relationship to its shipping cost. For example:
- Expensive Products: A product such as a refrigerator may cost $1,000. This total cost may be $900 for the refrigerator plus $100 for the total shipping cost. If the shipping cost increases 50% then the new shipping cost will be $150 and the new price of the refrigerator will then be $1,050. This represents a five percent increase in the price we would pay for the refrigerator.
- Inexpensive Products: A ten-pound bag of white rice may cost $6.00. This total cost may be $3.00 for the rice and $3.00 for the total shipping cost. If the shipping cost increases 50% then the new shipping cost will be $4.50 and the new price of the ten-pound bag of rice will then be $7.50. This represents a twenty-five percent increase in the price we would pay for the bag of rice.
- Fresh Hamburger and Fresh Milk: Some food products have a very long shelf life. This is true for almost all canned food products. Canned foods are usually processed during the harvest season and then stored in a warehouse for future sale. This means their cost was locked in at some time in the past. On the other hand, fresh food products need to be prepared and delivered fresh to the customer in a relatively short interval of time. Therefore a fresh food product will more rapidly respond to the total impact of hyperinflation when compared to a long shelf life food product that was prepared many months ago. That is why fresh hamburger and fresh milk were both included as products to watch for the true impact of inflation.
The following inflation index is balanced with two fuel products (gasoline and diesel) and two fresh food products (meat and dairy).
| Date | Gasoline | Diesel Fuel | Fresh Hamburger | Fresh Milk | Total All Four | Inflation for 1 Year | Inflation Since 2011 |
| January 2011 | $2.97 | $3.29 | $2.88 | $2.48 | $11.62 | - | - |
| January 2012 | $3.25 | $3.63 | $3.08 | $3.18 | $13.14 | 13.1% | 13.1% |
| January 2013 | $3.27 | $3.86 | $3.38 | $3.48 | $13.99 | 6.5% | 20.4% |
| January 2014 | $3.09 | $3.79 | $3.48 | $3.68 | $14.04 | 0.4% | 20.8% |
| January 2015 | $2.28 | $2.89 | $3.88 | $3.48 | $12.53 | -10.8% | 7.8% |
| January 2016 | $1.85 | $2.21 | $3.88 | $2.89 | $10.83 | -13.6% | -6.8% |
| January 2017 | $2.25 | $2.39 | $4.48 | $2.75 | $11.87 | 9.6% | 2.2% |
| January 2018 | $2.30 | $2.70 | $3.88 | $2.35 | $11.23 | -5.4% | -3.4% |
| January 2019 | $2.00 | $2.90 | $3.78 | $2.27 | $10.95 | -2.5% | -5.8% |
| January 2020 | $2.46 | $2.82 | $3.98 | $3.12 | $12.38 | +13.1% | +6.5% |
| January 2021 | $1.96 | $2.39 | $3.98 | $2.30 | $10.63 | -14.1% | -8.5% |
| January 2022 | $3.02 | $3.24 | $4.48 | $2.30 | $13.04 | +22.7% | +12.2% |
| January 2023 | $3.01 | $4.82 | $4.58 | $3.53 | $15.94 | +22.2% | +37.2% |
| January 2024 | $3.05 | $4.19 | $4.88 | $3.26 | $15.38 | -3.5% | +32.4% |
On January 2, 2024 diesel and milk prices have decreased but gasoline and hamburger prices have increased.
Summary:
In January of 2017 gasoline was $2.39 per gallon and in January of 2021 gasoline was $2.39 per gallon. During these four years when Donald Trump was President of the USA the price of gasoline went up and down but the price of gasoline ended at the same price as it started.
In January of 2021 gasoline was $2.39 per gallon and in January of 2024 gasoline is $4.19 per gallon. At the end of the three years while Joe Biden has been President of the USA the price of gasoline is now $1.80 per gallon higher than when he first became President.
Prime Interest Rate
(Source: https://www.fedprimerate.com/wall_street_journal_prime_rate_history.htm)
| End of Year | Prime Interest Rate |
| 2005 | 7.25% |
| 2006 | 8.25% |
| 2007 | 7.25% |
| 2008 | 3.25% |
| 2009 to 2015 | 3.25% |
| December 16, 2015 | 3.50% |
| December 15, 2016 | 3.75% |
| December 14, 2017 | 4.50% |
| December 20, 2018 | 5.50% |
| December 11, 2019 | 4.75% |
| December 16, 2020 | 3.25% |
| December 15, 2021 | 3.25% |
| December 16, 2022 | 7.50% |
| December 13, 2023 | 8.50% |
For seven years, from December 16, 2008 until December 15, 2015 the prime interest rate was relatively low at 3.25%.
On December 16, 2015 the prime interest rate was increased by 1/4 percent to 3.50%.
On December 15, 2016 the prime interest rate was increased by 1/4 percent to 3.75%.
On March 15, 2017 the prime interest rate was increased by 1/4 percent to 4.00%.
On June 15, 2017 the prime interest rate was increased by 1/4 percent to 4.25%.
On December 14, 2017 the prime interest rate was increased by 1/4 percent to 4.50%.
On March 22, 2018 the prime interest rate was increased by 1/4 percent to 4.75%.
On June 14, 2018 the prime interest rate was increased by 1/4 percent to 5.00%.
On September 27, 2018 the prime interest rate was increased by 1/4 percent to 5.25%.
On December 20, 2018 the prime interest rate was increased by 1/4 percent to 5.50%.
On July 31, 2019 the prime interest rate was increased by 1/4 percent to 5.25%.
On September 18, 2019 the prime interest rate was decreased by 1/4 percent to 5.00%.
On October 30, 2019 the prime interest rate was decreased by 1/4 percent to 4.75%.
On December 11, 2019 the prime interest rate was not changed from 4.75%.
On March 3, 2020 the prime interest rate was decreased by 1/2 percent to 4.25%.
On March 15, 2020 the prime interest rate was decreased by 1 percent to 3.25%.
On December 16, 2020 the prime interest rate was not changed from 3.25%.
On December 15, 2021 the prime interest rate was not changed from 3.25%.
On March 16, 2022 the prime interest rate was increased by 1/4 percent to 3.50%.
On May 4, 2022 the prime interest rate was increased by 1/2 percent to 4.00%.
On June 15, 2022 the prime interest rate was increased by 3/4 percent to 4.75%.
On July 27, 2022 the prime interest rate was increased by 3/4 percent to 5.50%.
On September 21, 2022 the prime interest rate was increased by 3/4 percent to 6.25%.
On November 2, 2022 the prime interest rate was increased by 3/4 percent to 7.00%.
On December 14, 2022 the prime interest rate was increased by 1/2 percent to 7.50%.
On February 1, 2023 the prime interest rate was increased by 1/4 percent to 7.75%.
On March 22, 2023 the prime interest rate was increased by 1/4 percent to 8.00%.
On May 3, 2023 the prime interest rate was increased by 1/4 percent to 8.25%.
On July 26, 2023 the prime interest rate was increased by 1/4 percent to 8.50%.
Summary:
In January of 2017 when Donald Trump became President of the USA the Prime Rate was 3.75% and when he left office in January of 2021 the Prime Rate was 3.25% which is a decrease of 0.5% in four years.
In January of 2021 when Joe Biden became President of the USA the Prime Rate was 3.25% and in January of 2024 the Prime Rate is 8.50% which is an increase of 5.25% in three years.
This is important because the Prime Rate impacts the price of many things within our economy including new mortgage rates, adjustable rate mortgage payments, and rental prices.
Perhaps we should all make tentative plans for mortgage rates and rental prices to increase in the year 2024.
Conclusion
May I humbly suggest that we all pray and that we all ask God to forgive us for our past mistakes, and to please help us, each and every one, to follow His Holy Divine guidance in the year 2024.
May God Bless,
Grandpappy.
Grandpappy's e-mail address is: RobertWayneAtkins@hotmail.com