By Megan Leonhardt
Prices on consumer goods and services including food, energy and housing jumped again in November, rising 6.8% over the previous year, according to the latest Consumer Price Index data released Friday.
That’s the fastest annual increase in the inflation rate since June 1982, according to the Bureau of Labor Statistics, which publishes the report. The measure of so-called core inflation, which excludes food and energy costs that can be more volatile, rose by 4.9% over the past year, the fastest rate since 1991.
“Today’s numbers reflect the pressures that economies around the world are facing as we emerge from a global pandemic—prices are rising,” President Joe Biden said Friday. The U.S. economy, like many worldwide, was devastated by the pandemic and while the country is making progress toward digging out from the effects of the pandemic, it’s not happening as fast as Biden says he would like to see.
But Biden stressed Friday that economic growth in the U.S. is stronger than in “virtually any other nation,” adding that Americans do have more money in their pockets these days. About $100 more each month than last year, he said, even after accounting for price increases. “But we have to get prices and costs down before consumers will feel confident in that recovery,” Biden added.
A portion of the ongoing inflation is due to continued supply chain problems, and the lag between surging consumer demand and recovering business production, especially in the energy sector, says PNC Senior Economist Bill Adams. “This is apparent in rapid increases in energy prices as oil producers have been slow to ramp production back up,” he says, adding that these sources of inflation should fade in the next year as the supply eventually catches up with demand and supply chain issues ease.
Roughly half of the annual overall consumer price increases can be attributed to the rising costs of energy and car-related expenses. Gasoline prices, for example, jumped 6.1% from October to November, and 58.1% over the past year. The cost of used cars and trucks surged 2.5% month-over-month, with annual increases topping an incredible 31.4%.
Over the course of the pandemic, the Federal Reserve has been focused on U.S. employment rates, saying the price spikes were transitory due to supply chain issues. But with the Consumer Price Index ticking up month after month since May 2020, officials recently acknowledged this is no longer a short-term problem. That realization could push officials to announce at the upcoming Federal Open Market Committee meeting next week that the Fed will end asset purchases before June, a move experts have been expecting. This could then pave the way for possibly raising the federal funds rate in 2022, says Dawit Kebede, a senior economist with the Credit Union National Association.
Breaking down the price increases by month, consumer prices rose 0.8% from October to November. That’s a slightly slower pace than the 0.9% price change from September to October, but above the monthly rates recorded in July, August, and September, according to the Council of Economic Advisers.
Grocery prices also continue to rise. Prices for at-home food purchases rose 0.8% in November and 6.4% over the past 12 months, according to the BLS. Meat, in particular, continued to be a pain point, with prices jumping 09% again in November. Over the past year, the cost of meats, poultry, fish, and eggs increased 12.8% with beef prices alone rising 20.9%.
The jump in food prices is largely due to higher oil prices, as well as companies passing on the cost of more expensive transportation, Adams says. Yet these price increases on everyday necessities like food and gas have been dealing a heavy blow to consumers.
Even with recent increases in wages many Americans have received this year thanks to the ongoing staffing shortage, many salaries haven’t been able to keep pace—meaning that many households are having to dig in deeper to afford the basics because their purchasing power is on the wane. Year-over-year wage growth in the U.S. is up an average of 2.7% during the third quarter, according to the PayScale Wage Index. But when inflation into consideration, real wages are actually down 0.4%.
“Inflation is outpacing increases in household income and weighing heavily on consumer confidence, which is at a decade low. It is only a matter of time before it impacts consumer spending in a material way,” Greg McBride, Bankrate’s Chief Financial Analyst, said Friday.