What happened to prices between 1973 and 1980
Between 1973 and 1980, the Consumer Price Index went from 44.4 to 82.4. Cumulatively, prices increased 85.6%, which works out to an average of 9.24% per year. Put differently, a dollar in 1973 bought what $0.54 buys in 1980.
Consumer prices rose 6.2% in 1973, nearly double 1972’s 3.2%, as Nixon’s wage and price controls were phased out through the year and pressure the controls had been holding back broke loose. The bigger shock arrived that October, when Arab oil-producing states embargoed exports to the United States and other supporters of Israel in the Yom Kippur War. Crude oil, which had traded around $3 a barrel, approached $12 by early 1974, and gas lines became a fixture outside filling stations nationwide. Earlier in the year, the Paris Peace Accords, signed that January 27, ended direct American combat in Vietnam and set a 60-day deadline for withdrawing remaining U.S. troops, even as fighting between North and South Vietnam went on. Financial markets read the year correctly as a turning point: the Dow Jones Industrial Average peaked at 1,051.70 on January 11, a level it would not reach again until 1980, before the oil shock and rising interest rates dragged it into a two-year bear market. A median household earned $10,512 in 1973, a new home sold for a median $32,500, and gas averaged 38.5 cents a gallon, still under half of what the embargo’s effects would bring the following year. Consumer prices stood 348.5% above their 1913 level by year’s end, with the decade’s worst inflation still ahead.