Value of $100 in 1989, adjusted to 2014

What happened to prices between 1989 and 2014

Between 1989 and 2014, the Consumer Price Index went from 124 to 236.736. Cumulatively, prices increased 90.9%, which works out to an average of 2.62% per year. Put differently, a dollar in 1989 bought what $0.52 buys in 2014: the 1989 dollar lost 47.6% of its purchasing power over these 25 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: 2014

In 2014, prices rose 1.6% and $100 from 1989 had the buying power of $191; the year's average CPI of 236.736 is the level behind every 2014 figure on this page.

2014 ended with the sharpest oil price drop in years. Consumer prices rose 1.6% for the year, close to 2013’s pace, but the annual figure hid a shift at the pump: crude oil fell from above $100 a barrel in June to below $60 in December, and gasoline finished the year near $2.25 a gallon after averaging $3.37 across 2014. The drop reflected record U.S. shale output, softer global demand, and OPEC’s decision in November to keep producing.

For households, cheaper fuel arrived just as the labor market strengthened. Median household income was $53,657, essentially flat on the prior year, and the median new home sold for about $288,500. The federal minimum wage stayed at $7.25 for a fifth year, and a first-class stamp rose to 49 cents.

The Federal Reserve ended its bond purchases in October but left its policy rate at zero. A stronger dollar helped hold down import prices. Because energy weighs heavily in the CPI, the late-year slide carried into 2015, which posted the smallest annual increase of the decade.

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