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US inflation soars to 31-year high
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US consumer prices accelerated in October as Americans paid more for gasoline and food, leading to the biggest annual gain in 31 years, more signs that inflation could stay uncomfortably high well into 2022 amid snarled global supply chains.
Inflation pressures are also brewing in the labor market, where an acute shortage of workers is driving wages higher. The number of Americans filing claims for unemployment benefits fell to a 20-month low last week, other data showed on Wednesday.
But high inflation is eroding the wage gains, adding to political risk for President Joe Biden, whose approval rating has been falling as Americans grow more anxious about the economy.
Broadening inflationary pressures could also complicate the Federal Reserve鈥檚 message. The Fed last week restated high inflation is 鈥渆xpected to be transitory.鈥 Both the White House and the Fed have maintained prices will fall once supply bottlenecks start easing.
鈥淩isks are clearly shifting toward US inflation remaining elevated longer than previously thought, but that doesn鈥檛 mean that it鈥檚 permanent,鈥 said Ryan Sweet, a senior economist at Moody鈥檚 Analytics.
鈥淭he Fed could face a situation where higher consumer prices begin to weigh on consumer spending, reducing GDP growth.鈥
The consumer price index jumped 0.9 percent last month after climbing 0.4 percent in September, the Labor Department said. The largest gain in four months hoisted the annual increase in the CPI to 6.2 percent. That was the biggest year-on-year rise since November 1990 and followed a 5.4 percent rise in September.
Economists had forecast the CPI shooting up 0.6 percent. The broad-based increase in prices last month was led by gasoline prices, which surged 6.1 percent after rising 1.2 percent in September. Brent crude oil has gained over 60 percent this year as a recovering global economy is heating up demand.
Food prices rose 0.9 percent, mostly driven by meat, eggs, fish, vegetables, cereals and bakery products. It also cost more to eat away from home. But prices for alcoholic beverages fell.
The government reported on Tuesday that producer prices increased strongly in October, reversing a slowing trend in the monthly PPI that had become entrenched since spring.
Inflation is heating up again as the economic drag from the summer wave of COVID-19 infections, driven by the Delta variant, fades and supply bottlenecks persist. Trillions of dollars in pandemic relief from governments across the globe fueled demand for goods, leaving supply chains overstretched.
The pandemic has upended labor markets, causing a global shortage of workers to produce raw materials and move goods from factories to consumers.
Biden in a statement blamed the inflation surge on energy prices and said he had directed the White House National Economic Council 鈥渢o pursue means to try to further reduce these costs, and have asked the Federal Trade Commission to strike back at any market manipulation or price gouging in this sector.鈥
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