By Martin Crutsinger | Associated Press
As rising food, energy, housing, automotive, and clothing prices in November caused Americans to endure the highest annual inflation rate in 39 years, prices for U.S. consumers rose 6 percent from a year earlier. Increased by 8 percent.
The Department of Labor also reported on Friday that prices rose 0.8% from October to November – a significant increase, but slightly less than 0.9% from September to October.
Inflation has been a huge burden on consumers, especially low-income households, and especially on daily needs. It also denied the high wages many workers received, complicated the Federal Reserve’s plans to cut aid to the economy, and had to support President Joe Biden, who is taking steps to ease inflationary pressures.
The rise in inflation was a mix of factors resulting from the rapid recovery of the pandemic crisis: a wave of government stimulus, very low rates developed by the Fed, and a shortage of supplies in factories. More customer demand than expected by manufacturers has slowed due to COVID-related closures and overcrowded ports and cargo areas.
Employers struggling with labor shortages are also raising wages, and many of them have raised prices to cover their high labor costs, thereby boosting inflation.
The result was a sharp rise in the price of goods ranging from food and old vehicles to electronics, home appliances and rental cars. According to Edmunds.com, the average price of a used car increased by almost 28% from November 2020 to the previous month, reaching a record $ 29,011.
After the pandemic began, the acceleration in prices, which began after Americans filled factories with orders for goods, spread to everything from services, apartment rentals and restaurant meals, to medical services and entertainment. Even some retailers who have built their businesses on the allure of very low prices have started to increase them.
Jason Furman, a Harvard economist and former White House aide to Obama, estimates that spending paid by a typical American family has increased by about $ 4,000 in the past 12 months.
In a statement on Friday, Biden said more could be done if Congress passed a comprehensive social spending and climate package aimed at reducing home spending on health care, prescription drugs and childcare.
“Until consumers are convinced of this recovery, we need to reduce prices and costs,” the president said. “That’s the main goal of my administration.”
Although the total income of Americans has also increased since the pandemic, a new survey shows that more people are noticing higher inflation than higher wages. According to a survey by the Associated Press-NORC Public Relations Research Center, two-thirds of them say their household spending has increased since the pandemic, but a quarter say their income has increased. .
Among them is Karin Dixon, who raised her salary this year and she hasn’t come close to covering her high expenses. Dixon, 55, works as a material recycler in a warehouse near his home in Knoxville, Tennessee.
At a time when, like many companies, some are worried that their employees will move elsewhere to earn more, his employer has raised wages – $ 1.75 per hour at his job. However, this is not enough to accommodate the high health insurance costs and more expensive food and gas.
More expensive gas “gets in the way of things, especially if you live in a village,” Dixon said. “If we need something important, we have to go to the next city or Knoxville. Our opportunities are limited.”
“It didn’t really bring much benefit,” he said. “You’ll make extra money, but you’ll have to pay more for food and gas to get back to work.”
Rising inflation outside the United States is squeezing households and businesses. In Europe, energy prices and consumer prices have risen to their highest level since the euro began more than 20 years ago. In 19 countries that use the euro, annual inflation was 4.9 percent in November, according to the European Union’s statistics agency. Inflation was much higher in some other European countries, close to 8 percent in Poland, above 9 percent in Lithuania and 21 percent in Turkey.
For U.S. consumers, inflation rose 6.8% in the 12 months to November, the largest increase since the 7.1% year-on-year increase in June 1982. The leak caused by the shocks of oil prices in the 1970s raised interest rates to double digits to curb inflation.
The continuation of high inflation surprised the Fed, whose chairman Jerome Powell described inflation for months as only “transient,” a short-term consequence of supply chains. Two weeks ago, Powell had indirectly acknowledged that high inflation had lasted longer than he expected, and announced a change. He said the Fed will work faster to repeal its ultra-low interest rate policy than previously planned.
This will allow the Fed to start raising its key short-term interest rate in the first half of next year. Since March 2020, when the coronavirus led to a deep recession in the economy, the figure has been almost zero. Debt rates will rise for some consumer and business loans.
Financial markets, which had been waiting for Friday’s inflation figures for a long time, took a step back. Treasury earnings and stock prices remained relatively stable, while fear levels on Wall Street eased. Ameriprise chief economist Russell Price said market sentiment has taken investors to the fact that the Fed will accelerate the recovery of emergency economic aid delivered after the pandemic.
The bulk of inflation last month was energy prices, particularly the price of petrol pumps, an increase of 58.1% over the previous year. Prices for housing, food, vehicles, air tickets, clothing and household goods also contributed significantly to the rise in prices in November.
Excluding volatile food and energy prices, core inflation rose 0.5% in November. Over the past 12 months, core prices have risen 4.9%, the largest increase since 1991.
Some economists are hoping that inflation will peak in the coming months and then gradually soften, giving consumers some relief. They noted that supply shortages in some sectors were gradually easing. While high energy costs will continue to weigh on consumers in the coming months, Americans may be able to get rid of previous forecasts that energy prices will reach record levels in the winter.
Oil prices fell slightly, which in turn led to a slight drop in gasoline prices. Even more sharply, natural gas prices fell nearly 40 percent from a seven-year high achieved in October. Food prices may also fall as a result of a sharp drop in corn and wheat prices from their highest levels since the beginning of the year.
In addition, the emergence of the omicron variant of the coronavirus updates the prospects for more canceled or delayed trips and fewer restaurant meals and shopping trips. All of this, if any, will slow consumer and business spending and potentially keep inflation at bay.
However, analysts warn that unexpected events, including severe winter storms, could lead to a further rise in energy prices as demand for energy increases. And they point out that easing overall inflationary pressures will depend on further developments in the normalization of global supply chains. White House officials said they believe a number of measures the administration will take to alleviate inflationary pressures, from increasing cargo processing from Los Angeles and Long Beach ports to extracting crude oil from oil reserves.
Some foreign economists have also begun to repeat this idea.
“November could be the peak of bad news on inflation,” said Gus Faucher, chief economist at PNC Financial. “We are already seeing a decline in energy prices,” he said. We are still dealing with dislocations resulting from the reopening of the economy, but I expect these problems in supply chains and labor shortages in some sectors to be resolved within the next year.
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AP writers Josh Boak and Christopher Rugaber in Washington, Tom Krisher in Detroit and Ann D’Innosenzio and Stan Choe in New York contributed to this report.
