\$

# U.S. inflation rate in 1889: -3.16%

### Inflation in 1889 and Its Effect on Dollar Value

Purchasing power increased by 3.16% in 1889 compared to 1888. On average, you would have to spend 3.16% less money in 1889 than in 1888 for the same item. This is an example of deflation.

In other words, \$1 in 1888 is equivalent in purchasing power to about \$0.97 in 1889.

The 1888 inflation rate was 0.00%. The inflation rate in 1889 was -3.16%. The 1889 inflation rate is lower compared to the average inflation rate of 2.59% per year between 1889 and 2019.

Inflation rate is calculated by change in the consumer price index (CPI). The CPI in 1889 was 9.20. It was 9.50 in the previous year, 1888. The difference in CPI between the years is used by the Bureau of Labor Statistics to officially determine inflation. Because the 1889 CPI is less than 1888 CPI, negative inflation (also known as deflation) has occurred.

 Average inflation rate -3.16% Converted amount (\$1 base) \$0.97 Price difference (\$1 base) \$-0.03 CPI in 1888 9.500 CPI in 1889 9.200 Inflation in 1888 0.00% Inflation in 1889 -3.16%

### Inflation by Country

Inflation can also vary widely by country. For comparison, in the UK £1.00 in 1888 would be equivalent to £1.01 in 1889, an absolute change of £0.01 and a cumulative change of 1.15%.

Compare these numbers to the US's overall absolute change of \$-0.03 and total percent change of -3.16%.

### Inflation by Spending Category

CPI is the weighted combination of many categories of spending that are tracked by the government. This chart shows the average rate of inflation for select CPI categories between 1888 and 1889.

Compare these values to the overall average of -3.16% per year:

Category Avg Inflation (%) Total Inflation (%) \$1 in 1888 → 1889
Food 0.00 0.00 1.00
Shelter 0.00 0.00 1.00
Energy 0.00 0.00 1.00
Apparel 0.00 0.00 1.00
New vehicles 0.00 0.00 1.00
Used cars and trucks 0.00 0.00 1.00
Transportation services 0.00 0.00 1.00
Medical care services 0.00 0.00 1.00
Medical care commodities 0.00 0.00 1.00

It's important to note that not all categories may be tracked since 1888. This table and visualization use the earliest available data for each category.

### How to Calculate Inflation Rate for \$1, 1888 to 1889

This inflation calculator uses the following inflation rate formula:

CPI in 1889CPI in 1888
×
1888 USD value
=
1889 USD value

Then plug in historical CPI values. The U.S. CPI was 9.5 in the year 1888 and 9.2 in 1889:

9.29.5
×
\$1
=
\$0.97

\$1 in 1888 has the same "purchasing power" or "buying power" as \$0.97 in 1889.

To get the total inflation rate for the 1 years between 1888 and 1889, we use the following formula:

CPI in 1889 - CPI in 1888CPI in 1888
×
100
=
Cumulative inflation rate (1 years)

Plugging in the values to this equation, we get:

9.2 - 9.59.5
×
100
=
-3%

### Comparison to S&P 500 Index

To help put this inflation into perspective, if we had invested \$1 in the S&P 500 index in 1888, our investment would be nominally worth approximately \$1.11 in 1889. This is a return on investment of 10.64%, with an absolute return of \$0.11.

These numbers are not inflation adjusted, so they are considered nominal. In order to evaluate the real return on our investment, we must calculate the return with inflation taken into account.

The compounding effect of inflation would account for -3.26% of returns (\$0.00) during this period. This means the inflation-adjusted real return of our \$1 investment is \$0.11.

Investment in S&P 500 Index, 1888-1889
Original Amount Final Amount Change
Nominal \$1 \$1.11 10.64%
Real
\$1 \$0.11 10.98%

Politics and news often influence economic performance. Here's what was happening at the time:

• The National Geographic Society is founded in Washington.
• The Constantinople Convention is signed: it guarantees free maritime passage through the Suez Canal during war and peace.
• Handel's Israel in Egypt on wax cylinder becomes first known recording of classical music
• In a State Emigrant Hospital, New York, Edith Eleanor McLean becomes the first baby to be placed in an incubator
• Vincent van Gogh, Dutch painter, cuts off his ear and sends it to a prostitute for safe keeping

### Data Source & Citation

Raw data for these calculations comes from the Bureau of Labor Statistics' (CPI), established in 1913. Inflation data from 1665 to 1912 is sourced from a historical study conducted by political science professor Robert Sahr at Oregon State University.

You may use the following MLA citation for this page: “Inflation Rate in 1889 | Inflation Calculator.” U.S. Official Inflation Data, Alioth Finance, 23 Oct. 2019, https://www.officialdata.org/inflation-rate-in-1889.