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Inflation and personal income - what do the numbers tell us

Written by Jason on February 11, 2013

Recently we helped a client understand the impact of nominal wage gains and inflation on the purchasing power of commodities. He was kind enough to allow us to share the results, which, quite frankly, surprised us.

What we did

We have reliable historical price data for a number of wholesale commodities, and we looked at the quantities that could be purchased by an American in either of these scenarios:

  • had average disposable income
  • worked a full-time minimum wage job

What we found

An American with average disposable income has had a significant increase in food+clothing-related purchasing power. Energy has gotten more expensive, with crude oil being the worst P.P. performer across all categories. The recent boom in US natural gas production has more than tripled purchasing power in only four years; however, on a five-year basis, it's still below the long-term average.

More surprisingly however (to us anyway), someone with a full-time minimum wage job has maintained roughly the same purchasing power as they would have had in the 1960s for food+clothing inputs.

Full details below.

Purchasing Power Scenarios
Average Disposable Income Minimum Wage Job
Edible Oils
Crude Oil
Natural Gas
Industrial Materials

The comparisons above are being made between the 53 year average and the 5 year trailing average.

  • ▲ is a >15% increase in purchasing power
  • ▼ is a >15% decrease in purchasing power
  • ▬ is in between

See the results

There are three measures on each chart, represented as follows:

  • Dots - yearly data points
  • Thick line - 5 year trailing average
  • Thin horizontal line - average over the 53 year period

On to the charts, starting with food:

Next up, energy:

Finally, industrial materials:

Tags: examples, charts

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