Inflation

Inflation refers to the broad increase in prices across a sector or an industry, like the automotive or energy business—and ultimately a country’s entire economy.

The chief measures of U.S. inflation are the Consumer Price Index (CPI), the Producer Price Index (PPI) and the Personal Consumption Expenditures Price Index (PCE), all of which use varying measures to track the change in prices consumers pay and producers receive in industries across the whole American economy.

Most economists consider a small amount of inflation a sign of a healthy economy. A moderate inflation rate encourages you to spend or invest your money today, rather than put it under your mattress.

However, inflation can become a destructive force in an economy if it is allowed to get out of hand and rise dramatically. Which is why small business owners and entrepreneurs need to monitor inflationary pressures regularly.