Posted by Olivia Rokeman | Bloomberg
US consumer prices rose at the fastest pace since 1990 last month, cementing high inflation as a sign of a recovery in the pandemic and eroding purchasing power even as wages rise.
The consumer price index is up 6.2% since October 2020, according to data from the Labor Department released Wednesday. The CPI rose 0.9% from September, the largest gain in four months. Both metrics beat all estimates in a Bloomberg survey of economists.
Higher prices for electricity, housing, food and vehicles contributed to the inflated figures, and showed that inflation was moving beyond the categories associated with the opening of a new building.
Shares opened lower, 10-year Treasury yields rallied and the dollar strengthened.
Amid strong demand, businesses have steadily increased prices for consumer goods and services, while supply chain bottlenecks and a shortage of skilled workers have increased costs.
The hike suggests that higher inflation will continue for longer than previously thought, putting pressure on Federal Reserve officials to end near-zero interest rates earlier than expected and potentially accelerating the rate of decline in bond purchases that have been reported. announced last week.
The data also threatens to exacerbate political problems for President Joe Biden and Democrats as they seek to pass a nearly $ 2 trillion tax and spending package and defend a razor-thin majority in Congress in next year’s midterm elections.
A report on Tuesday showed that prices paid to US producers also accelerated in the past month, mainly due to higher commodity prices, as well as heightened fears of persistent price pressures around the world.
In China, industrial-level inflation rose the most in 26 years last month, while consumer prices in Brazil rose more than forecast.
Excluding volatile food and energy supplies, so-called core inflation rose 0.6% month-over-month and 4.2% year-over-year. The annual growth rate was the largest since 1991.
Housing costs, considered a more structural component of the CPI and accounting for about a third of the overall index, rose 0.5% in October, the highest in four months, as higher rents and house prices are supported by the data. The cost of hotel accommodation has increased.
New car prices rose 1.4% last month as global semiconductor shortages continue to constrain inventories and drive up costs. Used car prices jumped 2.5%.
Americans also face higher spending on basic necessities:
- Food was up 5.3% year-over-year, the most since January 2009.
- Gasoline is up 6.1% since September, the biggest gain since March
- Electricity costs jumped 1.8% – the largest monthly increase since 2014.
- The rise in fuel oil prices compared to the previous month amounted to 12.3%, the most since 2007.
“Rising energy prices, increasing supply chain bottlenecks and higher rents have all dramatically increased prices in the consumer basket,” Bloomberg Economics’ Anna Wong and Andrew Husby said in a note. Looking ahead, “these factors and adverse underlying effects will not allow the CPI to peak until January.”
Through the lens of the company
“We have not seen, I would say, more resistance to our price increases than we have seen historically.” – Chief Financial Officer of McDonald’s Corp. Kevin Ozan, Statement of Financial Results October 27.
“Looking at the fourth quarter, we expect our sales price dynamics to continue to gain momentum as we work to mitigate the inflationary pressures on raw materials and logistics that we have experienced throughout the year.” – Chief Financial Officer of 3M Co. Monish Patolavala, Statement of Financial Results October 26
“We feel very comfortable, because any inflation that affects our margins today, we have the opportunity to compensate for it.” – Chief Financial Officer of Chipotle Mexican Grill Inc. John Hartung, October 21st Financial Report.
“We have now announced prices in nine out of ten categories, so we are very broad.” – Chief Financial Officer of Procter & Gamble Co. André Schulten, Statement of Financial Results October 19
While most of the CPI categories rose, airfare declined for the fourth month and clothing prices remained unchanged.
Wages have risen markedly in recent months – with some measures rising the most in history – but higher consumer prices are undermining the purchasing power of Americans.
Separate data showed that average hourly earnings adjusted for inflation on Wednesday fell 1.2% in October from a year earlier.
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