Annual inflation hits 30-year high
Consumer prices grew far faster than expected in October, according to data released Wednesday by the Labor Department.
The consumer price index (CPI), which tracks inflation for a range of staple goods and services, rose 0.9 percent last month and 6.2 percent in the 12-month period ending in October, the highest rate in the U.S. in 30 years. Analysts broadly expected the CPI to rise by 0.5 percent last month, up from a gain of 0.4 percent in August, and 5.8 percent over the past year.
The sharp jump in the inflation rate is a dismal sign for President Biden and Democrats as they face growing pressure over rising prices. Despite strength across the economy, the president’s approval rating has fallen steadily since spring due in part to growing political backlash over higher food and gas prices.
Much of the year’s inflation had been driven in specific sectors hit hard by the coronavirus pandemic and related shortages, such as automobiles, lumber, rented housing and energy. But price growth picked up broadly across the economy in October and accelerated sharply for energy and food.
“The monthly all items seasonally adjusted increase was broad-based, with increases in the indexes for energy, shelter, food, used cars and trucks, and new vehicles among the larger contributors,” the Bureau of Labor Statistics explained.
Energy prices rose a staggering 4.8 percent in October, led by a 1.6 percent increase in gasoline prices, while food prices rose 0.9 percent. Most of the higher food inflation came from sharp increases for meat prices, while shelf-stable goods saw lower price growth.
Without food and energy prices, the CPI still rose 0.6 percent last month after a 0.2 percent increase in September. Only prices for airfares and alcohol declined in October.
Inflation began to pick up at the start this year as prices began to recover from pandemic-driven plunges. Economists expected inflation to remain above pre-pandemic levels as the economy recovered through spring, but price growth has run higher and for longer than many anticipated.
Consumer demand and spending rebounded much quicker than many businesses were able to handle after shutting down amid the onset of COVID-19 last year. As manufacturers, shipping companies, warehouses and retailers scrambled to meet surging demand, the emergence of the delta variant in late July upended much of that progress with rippling shutdowns across the world.
The Biden administration has pushed to clear up backlogs at ports, ramp up package delivery, rally union workers and promote widespread COVID-19 vaccinations to help loosen up supply lines.
“President Biden has clearly recognized the stress that even a small amount of inflation can bring to family budgets, and he has told his team to carefully track these developments and consider both near- and longer-term ways to ameliorate the recent trend,” said Jared Bernstein, member of the White House Council of Economic Advisers, during a Tuesday seminar hosted by the Roosevelt Institute and Groundwork Collaborative.
Biden on Tuesday also spoke with the CEOs of major shipping and retail companies and announced a plan to allow port authorities to redirect cost savings from existing federal projects to help address supply chain bottlenecks.
Experts say there is little the U.S. can do on its own to fix a global snarl in supply chains. It could be months before price pressures begin to ease, even though most economist expect inflation to begin falling toward pre-pandemic levels next year.
Still, the sharp increase in inflation last month will likely boost pressure on Biden to scale back his economic agenda as Democrats attempt to cement a $1.75 trillion social services and climate bill before Thanksgiving.
Biden administration officials, many Democratic lawmakers and some economists believe the broader Build Back Better agenda could actually reduce inflation. The bill’s investments in child care and workforce development could help millions of workers sidelined by the pandemic return to the labor market and ease pressure on overloaded businesses. The measure is also expected to have a limited impact on the federal debt thanks to a range of tax hikes on wealthy individuals and corporations proposed to pay for it.
Even so, conservative Democrats such as Sen. Joe Manchin (W.Va.) have continuously raised concerns about the inflationary impact of further spending. Republican lawmakers have also sought to tie Biden and Democrats to rising inflation ahead of the midterm elections, making October’s overshoot useful ammunition.
Updated at 9:24 a.m.
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