WASHINGTON: Prices for US consumers rose 6.8% in November from a year earlier as rising costs of food, energy, housing and other goods forced Americans to endure their highest annual inflation rate since 1982.
The Labor Department also reported Friday that prices rose 0.8% from October to November.
Inflation is adding pressure to consumers, especially low-income households, and especially to everyday necessities.
It has also negated the high wages many workers receive, complicating the Federal Reserve’s plans to reduce its aid to the economy, and flagging public support for the president. Joe Biden,
Fueling inflation, the rapid rebound from the pandemic slowdown has resulted in a mix of factors: a flurry of government stimulus, ultra-low rates engineered by the Fed, and a supply crunch at factories in the US and abroad.
Manufacturers have been slowed down by higher-than-expected customer demand, Covid-related shutdowns and overwhelmed ports and freight traffic.
Employers grappling with labor shortages are also raising wages, and many of them have raised prices to offset their higher labor costs, leading to increased inflation.
The result is an increase in the prices of goods ranging from food and used vehicles to electronics, household goods and rental cars.
The spurt in prices, which began after the pandemic hit factories as Americans flooded factories with orders for goods, spilled over into services, from apartment rents and restaurant meals to medical services and entertainment.
The continuation of high inflation has stunned the Fed, headed by Jerome. Powell, characterized inflation for months as only “transient”, a short-term consequence of disrupted supply chains.
Two weeks ago, however, Powell signaled a turnaround, indirectly admitting that high inflation has lasted longer than he expected. He suggested the Fed would act more quickly to phase out its ultra-low-rate policies than previously planned.
Some economists are expecting inflation to peak in the coming months and then gradually subside and provide some relief for consumers.
He noted that the supply constraints in some industries are slowly starting to ease. And while higher energy costs will continue to burden consumers in the coming months, Americans will be spared from earlier forecasts that energy prices will hit record highs in winter.
Oil prices have declined marginally and, in turn, gasoline prices have come down slightly.
According to AAA, a gallon of gas averages $3.38, up from $3.42 a month ago.
Even more dramatically, natural gas prices have fallen nearly 40% from a seven-year high in October.
The result is that average home heating costs will be higher than last year’s levels, but they will not rise as much as expected.
Food prices could also potentially come down due to a sharp fall in corn and wheat prices, which were high at the beginning of the year.
Mark Wolfe, executive director of the National Energy Assistance Directors Association, said the average cost of heating a home this winter would be an estimated $972.
That’s less than the $1,056 estimated by his group in October, though still higher than the average $888 consumers paid to heat homes last year.
A combination of factors has been driving energy prices down in recent weeks.
Unseasonal hot weather has helped in the fall in natural gas futures prices.
In addition, the United States and several other major major nations have agreed to release oil from their strategic reserves.
And the OPEC+ oil cartel reached an agreement in January to release more oil.
What’s more, the emergence of the Omicron version of the coronavirus has renewed the prospect of more canceled or postponed travel and fewer restaurant dining and shopping trips.
All this, if it happened, would slow consumer and business spending and potentially rein in inflation.
Still, analysts warn that unforeseen developments, including heavy winter storms, with potentially increased demand for energy, could push energy prices up again.
And analysts cautioned that easing overall inflationary pressures will depend on further progress in normalizing global supply chains.
Senior White House officials have said they believe the administration has taken a range of actions, from boosting the processing of cargo from the ports of Los Angeles and Long Beach to the release of crude oil from petroleum reserves, leading to inflation. It will help to reduce the pressure. ,
Some outside economists have begun to echo that view.
“I think November will be the worst, and going forward we will see steady improvement,” said Mark zandicChief Economist at Moody’s Analytics. “As the delta wave of COVID subsides and the supply chain begins to heal itself, we will begin to see an improvement in production and shipments.”
Zandi said he believes inflation will begin to improve with the December price report and that by this time next year, annual inflation will return to around 3%, closer to the Fed’s 2% target.
For now, though, against a backdrop of persistently high inflation, the Fed may make an announcement next week after announcing a sharp reduction in its monthly bond purchases. The purpose of those purchases is to reduce long-term borrowing costs.
Doing so would put the Fed on its way to begin raising its key short-term interest rate as early as the first half of next year.
The rate has been pegged at almost zero since March 2020, when the coronavirus sent the economy into a deep recession.
The Labor Department also reported Friday that prices rose 0.8% from October to November.
Inflation is adding pressure to consumers, especially low-income households, and especially to everyday necessities.
It has also negated the high wages many workers receive, complicating the Federal Reserve’s plans to reduce its aid to the economy, and flagging public support for the president. Joe Biden,
Fueling inflation, the rapid rebound from the pandemic slowdown has resulted in a mix of factors: a flurry of government stimulus, ultra-low rates engineered by the Fed, and a supply crunch at factories in the US and abroad.
Manufacturers have been slowed down by higher-than-expected customer demand, Covid-related shutdowns and overwhelmed ports and freight traffic.
Employers grappling with labor shortages are also raising wages, and many of them have raised prices to offset their higher labor costs, leading to increased inflation.
The result is an increase in the prices of goods ranging from food and used vehicles to electronics, household goods and rental cars.
The spurt in prices, which began after the pandemic hit factories as Americans flooded factories with orders for goods, spilled over into services, from apartment rents and restaurant meals to medical services and entertainment.
The continuation of high inflation has stunned the Fed, headed by Jerome. Powell, characterized inflation for months as only “transient”, a short-term consequence of disrupted supply chains.
Two weeks ago, however, Powell signaled a turnaround, indirectly admitting that high inflation has lasted longer than he expected. He suggested the Fed would act more quickly to phase out its ultra-low-rate policies than previously planned.
Some economists are expecting inflation to peak in the coming months and then gradually subside and provide some relief for consumers.
He noted that the supply constraints in some industries are slowly starting to ease. And while higher energy costs will continue to burden consumers in the coming months, Americans will be spared from earlier forecasts that energy prices will hit record highs in winter.
Oil prices have declined marginally and, in turn, gasoline prices have come down slightly.
According to AAA, a gallon of gas averages $3.38, up from $3.42 a month ago.
Even more dramatically, natural gas prices have fallen nearly 40% from a seven-year high in October.
The result is that average home heating costs will be higher than last year’s levels, but they will not rise as much as expected.
Food prices could also potentially come down due to a sharp fall in corn and wheat prices, which were high at the beginning of the year.
Mark Wolfe, executive director of the National Energy Assistance Directors Association, said the average cost of heating a home this winter would be an estimated $972.
That’s less than the $1,056 estimated by his group in October, though still higher than the average $888 consumers paid to heat homes last year.
A combination of factors has been driving energy prices down in recent weeks.
Unseasonal hot weather has helped in the fall in natural gas futures prices.
In addition, the United States and several other major major nations have agreed to release oil from their strategic reserves.
And the OPEC+ oil cartel reached an agreement in January to release more oil.
What’s more, the emergence of the Omicron version of the coronavirus has renewed the prospect of more canceled or postponed travel and fewer restaurant dining and shopping trips.
All this, if it happened, would slow consumer and business spending and potentially rein in inflation.
Still, analysts warn that unforeseen developments, including heavy winter storms, with potentially increased demand for energy, could push energy prices up again.
And analysts cautioned that easing overall inflationary pressures will depend on further progress in normalizing global supply chains.
Senior White House officials have said they believe the administration has taken a range of actions, from boosting the processing of cargo from the ports of Los Angeles and Long Beach to the release of crude oil from petroleum reserves, leading to inflation. It will help to reduce the pressure. ,
Some outside economists have begun to echo that view.
“I think November will be the worst, and going forward we will see steady improvement,” said Mark zandicChief Economist at Moody’s Analytics. “As the delta wave of COVID subsides and the supply chain begins to heal itself, we will begin to see an improvement in production and shipments.”
Zandi said he believes inflation will begin to improve with the December price report and that by this time next year, annual inflation will return to around 3%, closer to the Fed’s 2% target.
For now, though, against a backdrop of persistently high inflation, the Fed may make an announcement next week after announcing a sharp reduction in its monthly bond purchases. The purpose of those purchases is to reduce long-term borrowing costs.
Doing so would put the Fed on its way to begin raising its key short-term interest rate as early as the first half of next year.
The rate has been pegged at almost zero since March 2020, when the coronavirus sent the economy into a deep recession.
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