By Kyle Plotkin
Investment Advisor Representative
[email protected]
We have written many times in this space about inflation: what it is, how it is calculated, and the impact it has on your financial picture. Most of the time, inflation is discussed in a year-over-year framework, which helps to illustrate its short-term effects. In simple terms, how much can you buy with a dollar today compared to a dollar last year?
Recently, I came across a chart from economist and professor Mark J. Perry, looking at inflation across different product categories over the past quarter-century. I realize that “quarter-century” may sound like an unnecessarily fancy way to say “25 years”, but after hearing my teenage stepson refer to things happening “back in the 1900’s”, it felt appropriate.
The baseline here is the overall inflation rate, or Consumer Price Index (CPI), which has risen by 92.6% since the year 2000. In other words, the average prices across consumer purchases have almost doubled over the past 25 years. During the same period, average hourly wages increased by 131.1%. However, that figure does not account for other important factors, such as changes in hours or the rising share of employee-paid health insurance costs.
What struck me the most is the nature of the categories that outpaced the overall inflation rate (on the chart in red) vs. the categories that rose more slowly or even declined (in blue) on an inflation-adjusted basis.
Some of the categories with the largest increases include:
- Hospital Services (281.4%)
- College Tuition and Fees (196.7%)
- Childcare and Nursery School (158.8%)
- Medical Care Services (147.0%)
- Housing (111.4%)
- Food and Beverages (105.7%)
Notice a pattern? These are all necessities. People will always need medical care, childcare, housing and food. Education remains critical for individual opportunity and for our country’s ability to compete globally. These categories tend to have inelastic demand. If you need hospital care or childcare, you’re stuck with no (or few) viable alternatives. Many of these are large, unavoidable expenses, which is why they often become major drivers of debt and can have long-lasting effects on household finances.
By contrast, several categories have remained relatively flat:
- New Cars (25.8%)
- Household Furnishings (21.4%)
- Clothing (1.5%)
These items are still important, but they offer consumers far more flexibility. They are generally discretionary purchases with elastic demand. If budgets are tight, you can buy used instead of new, hold onto an older couch a bit longer, or postpone a clothing purchase. Consumers have options.
Finally, some categories have actually become more affordable over time:
- Cell Phone Services (-44.1%)
- Toys (-74.2%)
- Computer Software (-73.0%)
- TVs (-98.1%)
While one could argue that cell phones have become a necessity in 2026, none of these categories represent basic survival needs. They are comforts–some very nice ones–but comforts nonetheless.
So what’s the takeaway here? First, is that life gets more expensive. That’s inflation. But when you separate necessities from luxuries, a clear pattern emerges: the things we need have increased in cost far more than the things we want. If it feels like it’s getting harder to free up money in your budget for discretionary spending, this chart helps explain part of the reason why.