Friday’s report from the Labor Department, based on this month’s data showing an increasingly tight labor market
US consumer prices rose solidly in November as Americans paid more for food and a range of goods, leading to the biggest annual gain since 1982, presenting a political nightmare for President Joe Biden’s administration. and was reinforcing expectations for the Federal Reserve to begin raising interest rates next year. ,
Friday’s report from the Labor Department, which follows on the heels of data showing an increasingly tight labor market this month, makes it likely that the US Central Bank will announce it is intensifying the wind of its big bond purchases. is at its policy meeting next week.
With supply constraints showing little sign of easing and companies raising wages as they compete for scarce workers, high inflation could persist well into 2022. The increased cost of living, a result of shortages due to the continuing COVID-19 pandemic, is hurting Mr. Biden’s approval rating. The White House and the Fed have described high inflation this year as transient.
“There isn’t much room for this inflation to be driven by pandemic or reopening anomalies,” said Will Compernoll, a senior economist at FHN Financial in New York. “Inflation is a tax, with gas and food being among its most regressive aspects. Low-income Americans spend disproportionately on both.”
The Consumer Price Index rose 0.8% last month after rising 0.9% in October. The broad-based increase was led by gasoline prices, which rose 6.1% compared to October. With the recent drop in crude oil prices, gasoline prices are peaking for now.
Food prices increased by 0.7%. The cost of food at home increased by 0.8% due to a jump in the prices of fruits and vegetables, meat and cereals and bakery products. The cost of home-cooked food increased by 6.4% over the past 12 months, the highest since December 2008. Eating out was also more expensive last month.
In the 12 months to November, the CPI gained 6.8%. This was the biggest year-on-year increase since June 1982 and followed a 6.2% increase in October. the economists voted Reuters had projected the CPI to climb 0.7% on a year-on-year basis and grow by 6.8%.
Rising inflation is eroding wage benefits. Inflation-adjusted average weekly earnings fell 1.9% year-on-year in November.
Mr Biden acknowledged the growing burden on the household budget from high inflation while trying to reassure Americans that the country is moving forward with efforts to ease supply constraints.
“We are making progress on challenges related to the pandemic to our supply chain, making goods more expensive to obtain, and I expect further progress on this in the coming weeks,” Mr Biden said in a statement.
In fact, there has been a downward trend in petrol prices since the end of November. That helped lift consumer sentiment in early December, a separate University of Michigan survey showed Friday.
Investors quickly took the strong inflation readings. US stocks were trading with gains. The dollar slipped against a basket of currencies. US Treasury prices rose.
strengthen the labor market
The government reported last week that the unemployment rate fell to a 21-month low of 4.2% in November. Tight labor market conditions were underscored by a report on Thursday that showed new applications for unemployment benefits fell last week to the lowest level in more than 52 years.
Other data this week showed there were 11 million job opportunities at the end of October and that Americans lost jobs at nearly record rates. Fed Chairman Jerome Powell has said the US central bank should consider accelerating its bond purchases at its policy meeting next week.
“The Fed has no choice but to accelerate tapering and prepare for the prospect of rate hikes much earlier than a few months ago,” said Sal Guatieri, a senior economist at BMO Capital Markets in Toronto.
Excluding volatile food and energy components, the CPI rose 0.5% last month after gaining 0.6% in October. The so-called core CPI was supported by rent, with rents equal to the owners’ primary residence that a homeowner would receive from renting a home, rising a solid 0.4%.
Hotel and motel accommodation costs are also high, as are apparel, home furnishings and health care.
The prices of used cars and trucks increased by 2.5% for the second consecutive month. New motor vehicle prices rose 1.1%, marking the eighth consecutive month of profit. A global semiconductor shortage has curtailed automotive production.
Airline fares increased by 4.7%. But the spread of the Omicron version of COVID-19 is likely to curtail profits, leaving some hesitant to travel by air. The United States is already experiencing a resurgence in coronavirus infections powered by Delta Edition.
But the cost of motor vehicle insurance fell. Entertainment prices fell after nine consecutive months of growth. The so-called core CPI jumped 4.9% on a year-on-year basis, the biggest increase since June 1991, after a 4.6% increase in October.
The Fed tracks the personal consumption expenditure (PCE) price index, excluding volatile food and energy components, for its flexible 2% inflation target. The core PCE price index rose 4.1% in the 12 months to October, the highest since January 1991. Data for November will be released later this month.
Economists expect the year-on-year CPI to rise above 7% before falling back and the core CPI rate to rise above 6%.
“The recent strength in CPI and PCE inflation reflects both factors that are temporary and should fade over time and factors that may be more stable,” said Daniel Silver, an economist at JPMorgan in New York.
“But the tightening in the labor market will continue over time and should continue to exert upward pressure on inflation.”
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