Economic News

Consumer Price Index Sees Largest 12 Month Increase in 30+ Years

Amid the United States’ continued efforts to recover from the pandemic and get Americans back to work, one of the biggest economic stories in recent months has involved inflation. Anecdotally, many consumers have reported seeing prices on essentials rise, impacting their personal finances. Now, the Bureau of Labor Statistics’ October Consumer Price Index shows that prices are not only increasing but are doing so at levels not seen in three decades.

As CNBC reports, the Labor Department’s latest report shows the consumer price index rising 6.2% over the past 12 months ending in October 2021. This marks the largest 12-month increase observed since November of 1990. Looking at just the single month, the index rose 0.9% to tie June’s rate.

Looking closer at the goods and services that make up the overall consumer price index, fuel costs represent the largest year-over-year increase. Last month, fuel oil prices climbed 12.3% as the 12-month increase reached 59.1%. Another sector seeing large increases is autos, especially used vehicles. Over the past 12 months, used car and truck prices have climbed 26.9% while growing 6.6% in the past month. Meanwhile, new car prices increased 1.4% in October and 9.8% over the past year.

Turning to food prices, while gains have been more modest compared to energy and car pricing, they’ve still seen significant increases. Overall food prices (including both “food at home” and “food away from home”) rose 0.9% in October. That puts the 12-month figure up 5.3%, with “food at home” coming in at a slightly higher 5.4% increase.

Putting these price increases into context, a separate Labor Department report shows average hourly earnings for U.S. employees only increased 0.4% from September to October. In other words, the seasonally adjusted “real average hourly earnings” fell by 0.5% due to the 0.9% increase in prices. Looking at the past year, real average hourly earnings have now decreased by 1.2%.

Despite the figures currently being seen, Fed Chairman Jerome Powell and Treasury Secretary Janet Yellen have both suggested that the inflation being observed will be temporary and is related to various pandemic-era issues. In fact, these policymakers anticipate normalization to occur within the next year. However, it’s unclear what will happen in the meantime — although Principal Global Investors chief strategist Seema Shah told CNBC. “Inflation is clearly getting worse before it gets better, while the significant rise in shelter prices is adding to concerning evidence of a broadening in inflation pressures.”

Ultimately, given the real-world impact that inflation has on everyday Americans, this will continue to be a major source of consternation as we move forward. This is especially the case as we move into the holiday season with supply chain fears already spreading to consumers. With political pressure also growing as a result, we’ll have to wait and see what steps, if any, are taken to try to relive some of these issues as the U.S. continues to strive for normalcy.

Also published on Medium.

Other Articles by Jonathan Dyer