Projecting the costs of goods and services is one of the most critical pieces to understanding the lifestyle that your wealth can support. This article discusses a trend that is important to keep in mind in light of the attention recently paid to inflation numbers. Economies often report higher inflation rates during the recovery phase of the economic cycle. Interestingly, one of the reasons appears to be the baseline from which the year-over-year statistic is calculated. Like stock prices that increased last year despite little earnings from the underlying companies, if the statistic you are comparing to is depressed, nearly any incremental increase looks impressive. The same can be said for inflation but instead of being impressive, it appears frightening.

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