Inflation spikes 6.2 percent, most in over 30 years

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Inflation continued to surge last month — with prices rising more than expected and at the fastest pace in more than 30 years as companies grapple with a snarled supply chain and a nationwide labor shortage, the feds announced Wednesday.

The Labor Department’s Consumer Price Index, which measures a basket of goods and services as well as energy and food costs, jumped 6.2 percent in October from a year earlier.

That’s up from September’s 5.4 percent year-over-year rise in prices and is the biggest 12-month rise since 1990.

It’s also the fifth straight month in which inflation surged more than 5 percent, year over year, under President Biden.

Cliff Hodge, chief investment officer at Cornerstone Wealth, called the readout “scorching.”

“Below the surface, over 80 percent of CPI subcomponents were above 2 percent, the highest since 1991, which indicates broader price increases, not only related to reopening,” he said.

The Bureau of Labor Statistics said the latest data showing the spike in inflation “was broad-based, with increases in the indexes for energy, shelter, food, used cars and trucks, and new vehicles among the larger contributors.”

Prices for medical care and furniture also rose, the data showed, while the “indexes for airline fares and for alcoholic beverages were among the few to decline over the month.”

Consumer prices rose 0.9 percent from September, the Labor Department added.

Inflation chart

Economists surveyed by Dow Jones expected a 5.9 percent year-over-year spike in October and a monthly increase of 0.6 percent.

The core consumer price index, which excludes volatile food and energy costs, rose 4.6 percent from a year ago, the fastest acceleration of the prices it tracks since August 1991.

Chris Zaccarelli, chief investment officer for Independent Advisor Alliance, called the data a “cause for alarm.”

Much of the price increases this summer and fall have been from sectors that were hit particularly hard by the pandemic, like airlines, car rentals and hotels, that have since seen demand come roaring back.

Gas prices grow along with inflation reaching records highs that haven't been seen in years.
Gas prices grow along with inflation reaching record highs that haven’t been seen in years.
REUTERS/Mike Blake

Gasoline prices, for example, soared another 12.3 percent in October, from September. Costs at the pump are now up more than 59 percent compared with a year ago, according to the new data.

And the closely watched used car prices rose a substantial 2.5 percent for the month. Costs are now up more than 26 percent from a year ago. The price of news rose, too, both on a monthly and annual basis, though more modestly than used cars.

Air fares, though, saw a drop of 0.7 percent — one of the few items to see a decline in price — and that comes after air fares tumbled 6.4 percent a month prior.

However, price increases have trickled into other areas of the economy, including housing and food, which is hitting the middle and working class hard.

In a worrying sign, food prices jumped another 0.9 percent in October after rising 1.2 percent in September. Food costs are now up more than 5 percent from a year ago, with some categories like meats, fish and eggs seeing even more volatile spikes.

The government said that the number of Americans newly seeking jobless benefits dropped again last week, inching closer to pre-pandemic levels.
The government said the number of Americans newly seeking jobless benefits dropped again last week, inching closer to pre-pandemic levels.
MANDEL NGAN/AFP via Getty Images

Beef and pork prices are up more than 20 percent and 14 percent, respectively, from a year ago, the feds said.

The all-important shelter costs, which account for one-third of the CPI, rose 0.5 percent for the month and are now up 3.5 percent from 12 months ago.

Though officials at the Federal Reserve have largely stuck to their view that price increases won’t be persistently rising for long as the economy works through pandemic-related supply chain kinks that are holding back supply.

But the latest inflation reading could put the Fed in a tough spot and perhaps force them to move more quickly to reel in their emergency pandemic stimulus program, said Nancy Davis, founder of Quadratic Capital Management.

“If inflation doesn’t subside, the Federal Reserve may need to taper at a more substantial rate and hike interest rates, which could hurt stocks and bonds,” she said.

“While supply chain disruptions and labor shortages won’t last forever, the bigger question is to what extent these factors affect wage inflation and housing inflation, which are stickier parts of the overall inflation picture and can be slower to reverse,” she added.

A man speaks with a representative from Whitsons Culinary Group at the Employers Only Long Island Food, Beverage and Hospitality Job Fair.
A man speaks with a representative from Whitsons Culinary Group at the Employers Only Long Island Food, Beverage and Hospitality Job Fair.
BRYAN R. SMITH/AFP via Getty Images

In October, inflation appeared to far outpace wage growth. The Labor Department previously reported that real wages after inflation fell 0.5 percent from September to October due to a rise in costs that outpaced the rise in average hourly earnings.

In a separate report also released Wednesday, the feds announced that the number of Americans newly seeking jobless benefits dropped again last week, inching closer to pre-pandemic levels amid the historically tight labor market.

As of last week, initial filings for unemployment benefits, seen as a proxy for layoffs, fell to 267,000, down 4,000 from the prior week’s revised level of 271,000, according to data released Wednesday by the Labor Department.

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