Is inflation really here? We hear talk of it on a macroeconomic level, but what does that mean for Middle America. Well, I live in Middle America and am relatively middle class, and fit the typcial family stereotype of husband, wife, 2 kids. Although no one would mistake my family as typical. (I don't think the Earth could take it.)
I also happen to keep a close eye on my budget using Quicken. Just for fun, I grabbed a few catagories and thought I would see what our expenses have been over the past few years and whether they have increased or decreased. Graphs on the flip if you are interested
I choose three measures, heat and electricity, fuel, and groceries. These are things that everyone buys and our consumption of them has been about the same through the last five years. All graphs are in percentage, with 100 being what we spent in the year 2000. First lets look at groceries
![groceries expesnes](http://www.bact.wisc.edu/~paustian/grocInflate.gif)
It shows an increase here although I would expect there would be an increase in consumption over time as my children have grown. However, I do not think my kids are eating 50% more than they did five years ago. We have seen an inflation of 50% over 2000.
The next two measures are more stable. The amount of driving we have done over the past five years has remained about the same, except for two driving trips in 2003 and 2004. The 2005 number is an estimate (multiplying our first quarter gas expenses by 4 to get an yearly number). This does not account for any vacation we may take, since we did not do any long drives this year.
![groceries expesnes](http://www.bact.wisc.edu/~paustian/gasInflate.gif)
We have seen a 50% increase in fuel expenditures. This is significant, especially given we have fuel efficient cars and do not drive very far to work. I shudder to think what your average SUV driver's expenses are now, especially if they live in suburbia.
Finally, there is heat and electricity. We have lived in the same house and no winter has stood out as being worse than any of the other ones. So I would expect this number to be the best measure of inflation in energy. We heat using gas and this has seen a large increase as shown by the graph.
![heat expesnes](http://www.bact.wisc.edu/~paustian/heatElect.gif)
One caveat is that I would expect the real 2005 number to be less than shown, since the first quarter includes winter heating. Expenses in the summer are less, but not that much. I would guess from past years a value of about 165%. There has been a rapid increase of heating expenses in the last year. This is a real dent in the budget. So the conclusion is clear. There is a rapid increase in how much my family is paying for energy.
Overall prices on these items has increased 50% in five years. With most of the increase coming in the last year. This clearly will affect the purchasing power of your average consumer. We should see a rapid slowdown in consumer spending, since consumers cannot go farther into debt. Once consumer spending drops, we should see a recession.