Value of $100 in 1989, adjusted to 2012

What happened to prices between 1989 and 2012

Between 1989 and 2012, the Consumer Price Index went from 124 to 229.594. Cumulatively, prices increased 85.2%, which works out to an average of 2.71% per year. Put differently, a dollar in 1989 bought what $0.54 buys in 2012: the 1989 dollar lost 46.0% of its purchasing power over these 23 years.

1989 closed out a decade that began in economic crisis and ended in a long, calmer expansion. Inflation for the year came in at 4.8%, higher than the mid-decade lull but still roughly a third of the 13.5% peak that had opened the decade in 1980. The federal minimum wage, unchanged at $3.35 an hour since January 1981, had gone longer without an increase than at any point since Congress created it, and had lost close to a third of its purchasing power to inflation in the meantime; lawmakers would finally raise it to $3.80 the following April. The decade’s other unfinished business came due in August, when Congress passed FIRREA, the law that created the Resolution Trust Corporation to seize and sell off the hundreds of savings and loan institutions that a decade of deregulation and risky lending had left insolvent, a bailout that eventually cost taxpayers over $100 billion. On Wall Street, the recovery was already complete: the Dow Jones Industrial Average closed 1989 at a record high, just over two years after Black Monday’s 22.6% single-day crash, capping the bull market that had begun at the Dow’s 776 low in August 1982. Between the S&L bailout, a wage floor eroded by years without a raise, and a stock market at new highs, 1989 captured how unevenly the decade’s disinflation had been felt.

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The destination year: 2012

In 2012, prices rose 2.1% and $100 from 1989 had the buying power of $185; the year's average CPI of 229.594 is the level behind every 2012 figure on this page.

2012 put a number on what the Federal Reserve was aiming for. In January the Fed announced a 2% inflation target, and consumer prices rose 2.1% for the year, almost exactly on it. Gasoline averaged $3.62 a gallon, another annual high, but the pace of increase cooled from 2011’s 3.2% as food and core prices grew more slowly.

The bigger story was housing and jobs. Home prices began to recover, and the median new home sold for about $245,200, up from $227,200 the year before. Median household income was $51,017. The federal minimum wage held at $7.25, and a first-class stamp rose to 45 cents.

In September the Fed started a third round of asset purchases, this one with no fixed end date, aimed at lowering unemployment. Overseas, the European Central Bank’s July pledge to do “whatever it takes” to save the euro calmed bond markets. A summer drought across the Midwest drove corn and soybean prices to records, a shock that reached grocery shelves only partly, because most of what shoppers pay for food covers processing and transport rather than raw crops.

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