Washington , Prices for US consumers jumped 6.2% in October from a year earlier as rising costs of food, gas and housing left Americans grappling with the highest inflation rate since 1990.
The Labor Department reported Wednesday that year-over-year growth in the Consumer Price Index surpassed 5.4% growth in September. From September to October, prices rose 0.9%, the highest month-on-month increase since June.
Inflation has been eroding strong gains in wages and wages for America’s workers in recent months, causing political headaches for the Biden administration and congressional Democrats and increasing pressure on the Federal Reserve as it believes How fast to scale back your efforts to boost the economy. ,
The reason for the rise in prices is the persistent supply crunch, coupled with strong consumer demand and COVID-related factory closures coming out of the pandemic slowdown. Ports around the world have been disrupted. America’s employers facing labor shortages are also offering massive wage increases, and many of them have raised prices to offset their higher labor costs, which have contributed to inflation.
FILE – A worker moves shipping containers outside a warehouse on November 7, 2021 in Redlands, California. Photographer: Roger Kisby/Businesshala via Getty Images
The result is driving up prices for a wide range of consumer goods, from food, heating oil and patio furniture to paints, chemicals and window curtains. After primarily affecting goods in pandemic-disrupted industries, rising inflation has spread to many of the services Americans spend money on, particularly restaurant meals, rental apartments and medical services. Which jumped 0.5% in October.
Job gains and wage growth have been healthier during the recovery from the pandemic than after the Great Recession nearly a decade ago. But unlike the years after that recession, when inflation was low, rising prices are undermining Americans’ confidence in the economy, the surveys found.
In October, excluding volatile food and energy categories, so-called core prices rose 0.6% from September. Core prices are now up 4.6% compared to a year ago.
Energy costs rose 4.8% from September to October, with gasoline, natural gas and heating oil rising for the same reason that many other commodities have become more expensive: demand has risen sharply as Americans continue to drive and fly. but not supplied.
In the past one year, with petrol prices increasing by almost 50%, energy costs have increased by 30%. Natural gas prices are also rising, and so is oil heating. The Energy Information Administration estimates that these increases will hit hard this winter, with Americans expected to spend 30% more on natural gas and 43% more on heating oil.
Economists still expect inflation to slow once supply constraints are eased and Americans shift more of their consumption back to pre-pandemic norms. As COVID-19 fades, consumers should spend more on travel, entertainment and other services and less on goods such as cars, furniture and appliances, easing the pressure on the supply chain.
But no one knows how long this may take. Inflation has persisted longer than most economists expected. And inflation is expanding beyond items like appliances and new and used vehicles directly affected by the pandemic.
“The high inflation is likely to get worse before it gets better,” economists at Goldman Sachs said in a research note on Sunday.
For months, Federal Reserve Chairman Jerome Powell described inflation as “transient”, a short-term phenomenon linked to labor and supply shortages that resulted in the economy returning from a pandemic recession. But last week, Powell acknowledged that higher prices could last well into next summer.
The Fed chairman announced that the central bank would begin reducing monthly bond purchases that began last year as an emergency measure to boost the economy. Investors now expect the Fed to raise its benchmark interest rate to twice its record-low near zero next year — much earlier than a few months ago.
Many large companies are passing the cost of higher salaries to their customers, and in some cases, consumers are paying instead to cut back.
Fast food prices rose 7.1% in October from a year ago, the government said on Wednesday. It was the largest such increase on record, reflecting rapidly rising labor costs, along with higher costs for beef and other foods.
To attract workers, McDonald’s, for example, raised hourly wages by 10% to 15% over the past year. To help cover those higher labor costs, as well as more expensive food and paper, the company said last month that it raised prices by 6% in the July-September quarter from a year earlier. Still, the company’s sales rose 14% as virus restrictions were eased.
Other companies have been more cautious. One of them, Wayfair, an online furniture retailer, said last week that its costs were rising as factories in Asia closed, ports were jammed amid the COVID outbreak, and labor costs soared. But the company isn’t necessarily bearing all those high costs.
“We are in a mass-oriented business where the average customer does not have an unlimited discretionary budget,” said Michael Fleischer, Wayfair’s chief financial officer. “Inflation is rampant across the economy, and there are competing demands for their share of time and wallet.”