Rising prices: Key measure of inflation peaks in 39 years | Economy


Pandemic price hikes have not stopped in the last month of 2021: a key indicator of inflation has hit a new high in 39 years.

The U.S. consumer price inflation index rose 7% in the last year before seasonal adjustments, the biggest price hike since June 1982, the Bureau of Labor Statistics reported on Wednesday.

It was also a faster rate of increase than 6.8% in November and higher than economists had predicted.

Excluding food and energy costs, which tend to be more volatile even in non-pandemic times, inflation hit 5.5% between December 2020 and December 2021 – the biggest annual jump since February 1991. This was a much faster pace than in November, when core inflation stood at 4.9%.

Separately, the food price index climbed 6.3%, while grocery store prices rose even more: 6.5% last year. The energy cost index has increased 29.3% over the past year.

But even though prices exploded last year, they are still far from the historic highs of the 1980s. Inflation peaked in the spring of 1980 at 14.8% without seasonal corrections, 14.6% with corrections.

For the month of December alone, prices rose 0.5%, seasonally adjusted. This was slightly more than economists had expected, but a decrease from the monthly increase of 0.8% in November.

What has become more expensive?

Home price indicators as well as used cars and trucks were the main contributors to December’s price increases.

Food prices also rose – up 0.5% – but at a slightly slower pace than in recent months. Prices increased in almost all major grocery categories, with fruit and vegetable prices rising the most.

Energy costs fell 0.4%, marking the first monthly drop since April 2021. But the drop is not expected to last until 2022.

“Unfortunately, energy prices rebounded in January after a temporary blow from Omicron in December,” said Action Economics chief economist Mike Englund.

What does this mean for inflation in the new year?

First of all, inflation won’t just go away in 2022.

While the monthly price increases may continue to moderate, it will take some time for the 12 month data to reflect this.

Englund believes that longer-term inflation data will continue to rise until at least February, when the data will be released in March.

“Nothing in this report changes our outlook for inflation,” Jefferies chief economist Aneta Markowska said in a note to clients. “We remain of the view that inflation – although still very high – is on the verge of peaking. We expect headline inflation to remain at 7% in January and start to decline thereafter. . “

For the Federal Reserve, which put the brakes on stimulus last fall and forecast multiple interest rate hikes this year, the hot inflation numbers only add to the urgency.

“We know that high inflation comes at a cost, especially for those who are less able to afford the higher costs of basic necessities like food, shelter and transportation,” Powell said in the remarks. released ahead of his confirmation hearing on Tuesday.

Holding prices at a level is one of the central bank’s two mandates (the other being maximum employment). Canceling stimulus, raising rates, and possibly unwinding its massive balance sheet are all steps to suppress inflation. And Thursday’s data didn’t give the Fed a reason to pause.

–Matt Egan contributed to this report.


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