Inflation In Alabama: Birmingham Financial Expert Weighs In

BIRMINGHAM, AL — Consumer prices jumped nearly 7 percent in October in Alabama, and residents in the state are feeling the pinch of inflation as prices of ffood, gas and housing continue to spike.

The result of inflation is obvious, but the causes of this particular inflation are not quite as cut and dry. Veteran banker John Norris, head of wealth and investments at Birmingham's Oakworth Capital Bank, told Patch the recent spike inflation is due to a "perfect storm" of a variety of factors.

SEE ALSO: How Much More Is Food, Gas Costing Alabama Residents?

"First, the Federal Reserve and Congress have flooded the financial system and economy with an enormous amount of money," Norris said. "As with anything, the more there is of something, the less it is worth — even money."

Consumer demand is another factor Norris cited. "Consumer demand has been incredibly strong, and suppliers have struggled to maintain the pace," he said. "To that end, retail sales have surged in excess of 16 percent over the last 12 months. The historical average is closer to 4.7 percent."

Norris added, "Speaking of supply, due to another perfect storm of factors, it is taking much longer for goods to get from point A to point B, leading to shortages in a number of key manufacturing inputs. When demand is greater than the supply, prices go up. Unfortunately for the rest of us, the perfect storm of factors causing the supply chain bottlenecks are mostly due to local rules, laws, and restrictions in our west coast ports, primarily in California."

Norris also pointed to the fact that fossil fuel production has decreased in the U.S, even as consumption has rebounded. This has caused energy prices to spike, which has had a major ripple effect throughout the economy, and makes everything more expensive, from production to distribution.

"Also, due to a shortage of labor and an abundance of job openings, wages have been going up, as employers fight to find and hold onto workers," Norris said. "And, almost bizarrely, U.S. household wealth has soared over the last 18 months, as stock prices and home values have skyrocketed. When folks have more cash, they tend to spend it."