Economic Analysis: Personal Income, Essay Example

In January, personal income increased by 10.0 percent at a monthly rate. The previous years had a constant percentage of personal income in the graph. The rate of personal income later rose from February 2020, which’s at the onset of the pandemic. These rates have fluctuated but remained afloat all through during the COVID-19 pandemic. Hence, it is reasonable to note the various factors that are likely to affect the CPI of a state or the national population as indicated by the scores for the previous months.

Factor Affecting the CPI

It is known that personal income increases during periods of economic expansion and declines during a recession. Hence the personal income increase could be linked to the coronavirus compensations and the waivers being enjoyed by the households. Personal income is directly related to consumer spending behaviours. As personal income increases, the spending rate consecutively increases; that is, the consumer will have enough money to spend. Consumer spending increased at a rate of 2.4% due to the coronavirus response and supplemental relief appropriations (CRRSA), which was set to roll in December 2020.

Also, the crude oil is another notable factor significantly manipulating the CPI. As a source of energy, oil tends to be one of the critical forces that drive most of the industries in the US and globally. When the price of crude oil increases, the cost of production records a similar progressive uptick leading to an increased consumer spending per item. Consequently, a drop in crude oil price declines the production and operational costs, hence lower CPI. This could be observed during the COVID 19 when the fuel price fluctuated policy disruption and global rearrangement that posed uncertainties in the industry. Subsequently, the nation posted a trendy uptick in the CPI as indicated in the chart due to the imminent inflation that hit the country differently.