Inflation

US Historic Average Inflation

Average US inflation since 1914 is: 3.27% (1914 -> 2023)

Inflation is the loss of cash’s buying power. If Inflation goes up 2%, that means everything just got 2% more expensive. That’s a total bummer. If inflation is a negative number, then we have deflation, where things get cheaper. At first glance deflation sounds AWESOME! Except there are reasons why it’s not so good. Let’s get into it.

When I first learned that the US government is actively trying to keep Inflation at 2% a year, I was like that seems dumb!

There is a really good reason we aim for 2% a year inflation. It’s to keep our wages growing, instead of shrinking or stagnant.

If we had deflation, and prices were getting cheaper, that means our wages would also decrease, because cash is worth more, businesses can get away with paying us less. That’s not something anyone wants!

The other option is no-growth, or inflation at 0%, which means our wages practically never grow either. Also not so good.

so a stable, low but positive inflation rate is good. There is also a corporate/business reason for a stable inflation rate, it makes future planning a lot easier.

Also it’s important to note that inflation is not a perfect 2% a year, and inflation isn’t steady across different markets. Groceries might grow inflation slower then say health care(which has been growing inflation wise pretty crazily lately).

PCE is arguably a better way of measuring inflation than CPI-U as it measures what people actually spent. Unfortunately both PCE and CPI are backwards looking, and for investing we want forward looking inflation. Sadly that’s not possible, though people pretend one can by looking at the difference between TIPS and nominal treasuries for a given time frame.

10 yr comparison of CPI and PCE

Historic US inflation data in %

1914 -> 2023 average: 3.27%

Historic inflation data in percent terms.
Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Average
1914 2 1 1 0 2.1 1 1 3 2 1 1 1 1
1915 1 1 0 2 2 2 1 -1 -1 1 1 2 1
1916 3 4 6.1 6 5.9 6.9 6.9 7.9 9.9 10.8 11.7 12.6 7.9
1917 12.5 15.4 14.3 18.9 19.6 20.4 18.5 19.3 19.8 19.5 17.4 18.1 17.4
1918 19.7 17.5 16.7 12.7 13.3 13.1 18 18.5 18 18.5 20.7 20.4 18
1919 17.9 14.9 17.1 17.6 16.6 15 15.2 14.9 13.4 13.1 13.5 14.5 14.6
1920 17 20.4 20.1 21.6 21.9 23.7 19.5 14.7 12.4 9.9 7 2.6 15.6
1921 -1.6 -5.6 -7.1 -10.8 -14.1 -15.8 -14.9 -12.8 -12.5 -12.1 -12.1 -10.8 -10.5
1922 -11.1 -8.2 -8.7 -7.7 -5.6 -5.1 -5.1 -6.2 -5.1 -4.6 -3.4 -2.3 -6.1
1923 -0.6 -0.6 0.6 1.2 1.2 1.8 2.4 3 3.6 3.6 3 2.4 1.8
1924 3 2.4 1.8 0.6 0.6 0 -0.6 -0.6 -0.6 -0.6 -0.6 0 0
1925 0 0 1.2 1.2 1.8 2.9 3.5 4.1 3.5 2.9 4.7 3.5 2.3
1926 3.5 4.1 2.9 4.1 2.9 1.1 -1.1 -1.7 -1.1 -0.6 -1.7 -1.1 1.1
1927 -2.2 -2.8 -2.8 -3.4 -2.2 -0.6 -1.1 -1.1 -1.1 -1.1 -2.3 -2.3 -1.7
1928 -1.1 -1.7 -1.2 -1.2 -1.1 -2.8 -1.2 -0.6 0 -1.1 -0.6 -1.2 -1.7
1929 -1.2 0 -0.6 -1.2 -1.2 0 1.2 1.2 0 0.6 0.6 0.6 0
1930 0 -0.6 -0.6 0.6 -0.6 -1.8 -4 -4.6 -4 -4.6 -5.2 -6.4 -2.3
1931 -7 -7.6 -7.7 -8.8 -9.5 -10.1 -9 -8.5 -9.6 -9.7 -10.4 -9.3 -9
1932 -10.1 -10.2 -10.3 -10.3 -10.5 -9.9 -9.9 -10.6 -10.7 -10.7 -10.2 -10.3 -9.9
1933 -9.8 -9.9 -10 -9.4 -8 -6.6 -3.7 -2.2 -1.5 -0.8 0 0.8 -5.1
1934 2.3 4.7 5.6 5.6 5.6 5.5 2.3 1.5 3 2.3 2.3 1.5 3.1
1935 3 3 3 3.8 3.8 2.2 2.2 2.2 0.7 1.5 2.2 3 2.2
1936 1.5 0.7 0 -0.7 -0.7 0.7 1.5 2.2 2.2 2.2 1.4 1.4 1.5
1937 2.2 2.2 3.6 4.4 5.1 4.3 4.3 3.6 4.3 4.3 3.6 2.9 3.6
1938 0.7 0 -0.7 -0.7 -2.1 -2.1 -2.8 -2.8 -3.4 -4.1 -3.4 -2.8 -2.1
1939 -1.4 -1.4 -1.4 -2.8 -2.1 -2.1 -2.1 -2.1 0 0 0 0 -1.4
1940 -0.7 0.7 0.7 1.4 1.4 2.2 1.4 1.4 -0.7 0 0 0.7 0.7
1941 1.4 0.7 1.4 2.1 2.9 4.3 5 6.4 7.9 9.3 10 9.9 5
1942 11.3 12.1 12.7 12.6 13.2 10.9 11.6 10.7 9.3 9.2 9.1 9 10.9
1943 7.6 7 7.5 8.1 7.4 7.4 6.1 4.8 5.5 4.2 3.6 3 6.1
1944 3 3 1.2 0.6 0 0.6 1.7 2.3 1.7 1.7 1.7 2.3 1.7
1945 2.3 2.3 2.3 1.7 2.3 2.8 2.3 2.3 2.3 2.3 2.3 2.2 2.3
1946 2.2 1.7 2.8 3.4 3.4 3.3 9.4 11.6 12.7 14.9 17.7 18.1 8.3
1947 18.1 18.8 19.7 19 18.4 17.6 12.1 11.4 12.7 10.6 8.5 8.8 14.4
1948 10.2 9.3 6.8 8.7 9.1 9.5 9.9 8.9 6.5 6.1 4.8 3 8.1
1949 1.3 1.3 1.7 0.4 -0.4 -0.8 -2.9 -2.9 -2.4 -2.9 -1.7 -2.1 -1.2
1950 -2.1 -1.3 -0.8 -1.3 -0.4 -0.4 1.7 2.1 2.1 3.8 3.8 5.9 1.3
1951 8.1 9.4 9.3 9.3 9.3 8.8 7.5 6.6 7 6.5 6.9 6 7.9
1952 4.3 2.3 1.9 2.3 1.9 2.3 3.1 3.1 2.3 1.9 1.1 0.8 1.9
1953 0.4 0.8 1.1 0.8 1.1 1.1 0.4 0.7 0.7 1.1 0.7 0.7 0.8
1954 1.1 1.5 1.1 0.8 0.7 0.4 0.4 0 -0.4 -0.7 -0.4 -0.7 0.7
1955 -0.7 -0.7 -0.7 -0.4 -0.7 -0.7 -0.4 -0.4 0.4 0.4 0.4 0.4 -0.4
1956 0.4 0.4 0.4 0.7 1.1 1.9 2.2 1.9 1.9 2.2 2.2 3 1.5
1957 3 3.4 3.7 3.7 3.7 3.3 3.3 3.7 3.3 2.9 3.3 2.9 3.3
1958 3.6 3.2 3.6 3.6 3.2 2.8 2.5 2.1 2.1 2.1 2.1 1.8 2.8
1959 1.4 1 0.3 0.3 0.3 0.7 0.7 1 1.4 1.7 1.4 1.7 0.7
1960 1 1.7 1.7 1.7 1.7 1.7 1.4 1.4 1 1.4 1.4 1.4 1.7
1961 1.7 1.4 1.4 1 1 0.7 1.4 1 1.4 0.7 0.7 0.7 1
1962 0.7 1 1 1.3 1.3 1.3 1 1.3 1.3 1.3 1.3 1.3 1
1963 1.3 1 1.3 1 1 1.3 1.3 1.3 1 1.3 1.3 1.6 1.3
1964 1.6 1.6 1.3 1.3 1.3 1.3 1.3 1 1.3 1 1.3 1 1.3
1965 1 1 1.3 1.6 1.6 1.9 1.6 1.9 1.6 1.9 1.6 1.9 1.6
1966 1.9 2.6 2.6 2.9 2.9 2.5 2.8 3.5 3.5 3.8 3.8 3.5 2.9
1967 3.5 2.8 2.8 2.5 2.8 2.8 2.8 2.4 2.8 2.4 2.7 3 3.1
1968 3.6 4 3.9 3.9 3.9 4.2 4.5 4.5 4.5 4.7 4.7 4.7 4.2
1969 4.4 4.7 5.2 5.5 5.5 5.5 5.4 5.7 5.7 5.7 5.9 6.2 5.5
1970 6.2 6.1 5.8 6.1 6 6 6 5.4 5.7 5.6 5.6 5.6 5.7
1971 5.3 5 4.7 4.2 4.4 4.6 4.4 4.6 4.1 3.8 3.3 3.3 4.4
1972 3.3 3.5 3.5 3.5 3.2 2.7 2.9 2.9 3.2 3.4 3.7 3.4 3.2
1973 3.6 3.9 4.6 5.1 5.5 6 5.7 7.4 7.4 7.8 8.3 8.7 6.2
1974 9.4 10 10.4 10.1 10.7 10.9 11.5 10.9 11.9 12.1 12.2 12.3 11
1975 11.8 11.2 10.3 10.2 9.5 9.4 9.7 8.6 7.9 7.4 7.4 6.9 9.1
1976 6.7 6.3 6.1 6 6.2 6 5.4 5.7 5.5 5.5 4.9 4.9 5.8
1977 5.2 5.9 6.4 7 6.7 6.9 6.8 6.6 6.6 6.4 6.7 6.7 6.5
1978 6.8 6.4 6.6 6.5 7 7.4 7.7 7.8 8.3 8.9 8.9 9 7.6
1979 9.3 9.9 10.1 10.5 10.9 10.9 11.3 11.8 12.2 12.1 12.6 13.3 11.3
1980 13.9 14.2 14.8 14.7 14.4 14.4 13.1 12.9 12.6 12.8 12.6 12.5 13.5
1981 11.8 11.4 10.5 10 9.8 9.6 10.8 10.8 11 10.1 9.6 8.9 10.3
1982 8.4 7.6 6.8 6.5 6.7 7.1 6.4 5.9 5 5.1 4.6 3.8 6.2
1983 3.7 3.5 3.6 3.9 3.5 2.6 2.5 2.6 2.9 2.9 3.3 3.8 3.2
1984 4.2 4.6 4.8 4.6 4.2 4.2 4.2 4.3 4.3 4.3 4.1 3.9 4.3
1985 3.5 3.5 3.7 3.7 3.8 3.8 3.6 3.3 3.1 3.2 3.5 3.8 3.6
1986 3.9 3.1 2.3 1.6 1.5 1.8 1.6 1.6 1.8 1.5 1.3 1.1 1.9
1987 1.5 2.1 3 3.8 3.9 3.7 3.9 4.3 4.4 4.5 4.5 4.4 3.6
1988 4 3.9 3.9 3.9 3.9 4 4.1 4 4.2 4.2 4.2 4.4 4.1
1989 4.7 4.8 5 5.1 5.4 5.2 5 4.7 4.3 4.5 4.7 4.6 4.8
1990 5.2 5.3 5.2 4.7 4.4 4.7 4.8 5.6 6.2 6.3 6.3 6.1 5.4
1991 5.7 5.3 4.9 4.9 5 4.7 4.4 3.8 3.4 2.9 3 3.1 4.2
1992 2.6 2.8 3.2 3.2 3 3.1 3.2 3.1 3 3.2 3 2.9 3
1993 3.3 3.2 3.1 3.2 3.2 3 2.8 2.8 2.7 2.8 2.7 2.7 3
1994 2.5 2.5 2.5 2.4 2.3 2.5 2.8 2.9 3 2.6 2.7 2.7 2.6
1995 2.8 2.9 2.9 3.1 3.2 3 2.8 2.6 2.5 2.8 2.6 2.5 2.8
1996 2.7 2.7 2.8 2.9 2.9 2.8 3 2.9 3 3 3.3 3.3 3
1997 3 3 2.8 2.5 2.2 2.3 2.2 2.2 2.2 2.1 1.8 1.7 2.3
1998 1.6 1.4 1.4 1.4 1.7 1.7 1.7 1.6 1.5 1.5 1.5 1.6 1.6
1999 1.7 1.6 1.7 2.3 2.1 2 2.1 2.3 2.6 2.6 2.6 2.7 2.2
2000 2.7 3.2 3.8 3.1 3.2 3.7 3.7 3.4 3.5 3.4 3.4 3.4 3.4
2001 3.7 3.5 2.9 3.3 3.6 3.2 2.7 2.7 2.6 2.1 1.9 1.6 2.8
2002 1.1 1.1 1.5 1.6 1.2 1.1 1.5 1.8 1.5 2 2.2 2.4 1.6
2003 2.6 3 3 2.2 2.1 2.1 2.1 2.2 2.3 2 1.8 1.9 2.3
2004 1.9 1.7 1.7 2.3 3.1 3.3 3 2.7 2.5 3.2 3.5 3.3 2.7
2005 3 3 3.1 3.5 2.8 2.5 3.2 3.6 4.7 4.3 3.5 3.4 3.4
2006 4 3.6 3.4 3.5 4.2 4.3 4.1 3.8 2.1 1.3 2 2.5 3.2
2007 2.1 2.4 2.8 2.6 2.7 2.7 2.4 2 2.8 3.5 4.3 4.1 2.8
2008 4.3 4 4 3.9 4.2 5 5.6 5.4 4.9 3.7 1.1 0.1 3.8
2009 0 0.2 -0.4 -0.7 -1.3 -1.4 -2.1 -1.5 -1.3 -0.2 1.8 2.7 -0.4
2010 2.6 2.1 2.3 2.2 2 1.1 1.2 1.1 1.1 1.2 1.1 1.5 1.6
2011 1.6 2.1 2.7 3.2 3.6 3.6 3.6 3.8 3.9 3.5 3.4 3 3.2
2012 2.9 2.9 2.7 2.3 1.7 1.7 1.4 1.7 2 2.2 1.8 1.7 2.1
2013 1.6 2 1.5 1.1 1.4 1.8 2 1.5 1.2 1 1.2 1.5 1.5
2014 1.6 1.1 1.5 2 2.1 2.1 2 1.7 1.7 1.7 1.3 0.8 1.6
2015 -0.1 0 -0.1 -0.2 0 0.1 0.2 0.2 0 0.2 0.5 0.7 0.1
2016 1.4 1 0.9 1.1 1 1 0.8 1.1 1.5 1.6 1.7 2.1 1.3
2017 2.5 2.7 2.4 2.2 1.9 1.6 1.7 1.9 2.2 2 2.2 2.1 2.1
2018 2.1 2.2 2.4 2.5 2.8 2.9 2.9 2.7 2.3 2.5 2.2 1.9 2.4
2019 1.6 1.5 1.9 2 1.8 1.6 1.8 1.7 1.7 1.8 2.1 2.3 1.8
2020 2.5 2.3 1.5 0.3 0.1 0.6 1 1.3 1.4 1.2 1.2 1.4 1.2
2021 1.4 1.7 2.6 4.2 5 5.4 5.4 5.3 5.4 6.2 6.8 7 4.7
2022 7.5 7.9 8.5 8.3 8.6 9.1 8.5 8.3 8.2 7.7 7.1 6.5 8
2023 6.4 6 5 4.9 4 3 3.2 3.7 3.7 3.2 3.1 3.4 4.1
2024 3.1 3.2 3.5 3.4 3.3 3 2.9 2.5 2.4
Average 3.27 3.27 3.28 3.30 3.31 3.31 3.29 3.27 3.27 3.27 3.26 3.27 3.27

Resources