I had the brilliant idea of getting my wife a bicycle for her birthday. Nothing fancy, mind you, just a comfortable touring bike. I had visions of us leisurely cycling to a nearby lake on a warm summer day, with sandwiches neatly stored in a picnic basket and Vivaldi’s “Summer,” from the “Four Seasons,” playing mysteriously, yet relaxingly, in the background.
Until I walked into a neighborhood bicycle shop, that is, and came face-to-face with the reality of 2021’s semi-post-COVID-19 economy (semi, because the pandemic really isn’t over, yet).
First, the shop — a reputable local chain with a staff of trim sales associations whose bulging leg muscles bore testament to their expertise — was nearly empty. Its stock on hand consisted of a few dozen inexpensive children’s bikes and, on the other extreme, an even smaller supply of high-end racing bikes selling for up to $12,000. It’s hard to find bikes these days, an associate said with an ironic smile.
Second, I came face-to-face with the silent scourge of inflation and supply shortages — the one the Biden administration insists is just a temporary adjustment to pent-up pandemic demand.
A salesman told me he knew exactly the type of bike I was looking for. He even surprised himself by finding one at another store somewhere along the Wasatch Front. He could have it sent to his store and held for me.
But there was a catch. I could pay the entire cost of the bike right now, sight unseen, or I could decide to wait to see it, first. But if I waited even one day to pay, the cost of the bike would jump by $50. That was by order of the manufacturer, which was raising its prices to reflect the rising cost of materials and the demand for its dwindling supply.
Real estate isn’t the only market forcing consumers to make split-second decisions as they compete against a slew of eager buyers. The most recent figures from the U.S. Department of Labor showed the consumer price index jumped 5% in May over the year before, which was the largest rate of inflation in 13 years. The department’s core price index, which doesn’t include food and energy, rose 3.8%. That was the highest jump in 29 years.
The Wall Street Journal’s editorial page put it in more practical terms. Since a year ago this time, the price of a used car has jumped 29.7%, airline tickets are up 24.1%, jewelry costs 14.7% more, footwear is up 7.1% and, yes, bicycles are up 10.1%.
And, since I mentioned real estate, the cost of a new house is $36,000 higher because of lumber prices alone. Supply and demand take it away from there. The real estate site Zillow.com shows the typical medium tier home in Salt Lake County currently is valued at $493,764, which is up an astounding 20.6% over last year.
The Journal notes that all the federal rescue plans, forgivable loans and checks to taxpayers have increased the money supply by 31% since the end of 2019, while federal spending has jumped by 50%, “distorting price signals and capital allocation.”
The administration says this is just a temporary adjustment. The Federal Reserve says it is “transitory.” And don’t worry, it has tools to use if inflation gets out of control. I know you’re relieved to hear that.
Some economists agree, noting that inflation seems to be affecting items that were most disrupted by the pandemic, such as tourism or luxury items.
But I have a few questions. If it’s temporary, does that mean prices eventually will come down again? Wouldn’t that be equally disruptive, especially for things like real estate, where people often borrow money for their purchases? And what about inflation’s impact on wages? Doesn’t every price increase, whether at the grocery store, at the gas pump or at the bike shop, mean my salary’s earning power gets smaller right now? When does that even out?
My bike story has a happy ending. I paid upfront, and even though I had to spoil the surprise by getting my wife to the store to try it out, she loved it. The sales associate said he would have refunded my money if it had been any different.
Of course, that just means I would have had to look elsewhere for a gift, the price of which would have been rising while I dithered over a bike.
Jay Evensen is a columnist for the Deseret News