Inflation report for 2022: the consumer price index rose 7.9% in the last 12 months, the biggest jump since 1982

WASHINGTON – As a result of rising spending on gas, food and housing, consumer inflation has jumped 7.9% in the last year, the sharpest surge since 1982 and probably only a harbinger of even higher prices in the future.

The increase, reported by the Labor Ministry on Thursday, reflects 12 months ending in February, and does not include most of the increase in oil and gas prices that occurred after Russia’s invasion of Ukraine on February 24. Since then, average gas prices across the country have jumped about 62 cents a gallon to $ 4.32, according to the AAA.

Even before the war, further accelerating price increases, reliable consumer spending, a steady rise in wages, and persistent supply shortages brought consumer inflation in the United States to its highest level in four decades. Moreover, the cost of housing, which accounts for about a third of the state consumer price index, has risen sharply, and this trend is unlikely to change any time soon.

A government report on Thursday also showed that from January to February, inflation rose by 0.8% compared to December to January by 0.6%.

For most Americans, inflation is well ahead of the pay rise that many received last year, making it harder to afford essentials such as food, gas and rent. As a result, inflation has become a major political threat to President Joe Biden and Democrats in Congress as snap elections approach. In polls, small businesses say this is also their main economic concern.

Aiming to halt rising inflation, the Federal Reserve is set to raise interest rates several times this year, starting with a modest raise next week. However, the Fed faces a subtle problem: if it tightens loans too aggressively this year, it risks undermining the economy and possibly causing a recession.

Energy prices that soared after Russia’s invasion of Ukraine jumped again this week after Biden said the United States was banning oil imports from Russia. Oil prices fell on Wednesday amid reports that the United Arab Emirates will urge other OPEC members to increase production. U.S. oil fell 12 percent to $ 108.70 a barrel, but still rose sharply from about $ 90 before Russia’s invasion.

MORE: This is how President Biden wants to fight inflation in America

However, energy markets have been so volatile that it is impossible to know whether the decline will continue. If Europe joins the United States and Britain and bans Russian oil imports, analysts estimate prices could rise to $ 160 a barrel.

The economic consequences of Russia’s war against Ukraine have changed the broad opinion of many economists and the Fed: inflation will begin to decline this spring, because prices in March and April 2021 rose so much that compared to a year ago would have shown a decline.

If gas prices remain close to their current levels, Eric Grape, senior economist at asset management company AllianceBernstein, estimates inflation could reach 9% in March or April.

WATCH: Here are some ways to save on a pump

The cost of wheat, corn, cooking oil and metals such as aluminum and nickel has also risen since the invasion. Ukraine and Russia are the leading exporters of these goods.

Even before the Russian invasion, inflation not only rose sharply, but also spread to additional sectors of the economy. Many prices have jumped over the past year because high demand has faced a shortage of goods such as cars, building materials and household goods.

But even for some services that have not been affected by the pandemic, such as rents, costs are also growing at the fastest pace in decades. Steady job growth and high housing prices are encouraging more people to move into apartments, which has increased the cost of rent the most in the last two decades. The level of vacant apartments has reached its lowest level since 1984.

In the last three months of last year, wages jumped by 4.5%, which was the sharpest growth in 20 years. This increase in wages, in turn, has forced many companies to raise prices to offset higher labor costs.

Rising energy costs pose a particularly difficult problem for the Fed. Higher gas prices tend to both accelerate inflation and weaken economic growth. This is because as their salaries are eroded by gas pumps, consumers tend to spend less in other ways.

This picture is similar to the dynamics of “stagflation” that made the economy of the 1970s miserable for many Americans. Most economists, however, say they believe the U.S. economy is growing strong enough that another recession is unlikely, even with higher inflation.

Copyright © 2022, Associated Press. All rights reserved.

Inflation report for 2022: the consumer price index rose 7.9% in the last 12 months, the biggest jump since 1982

Source link Inflation report for 2022: the consumer price index rose 7.9% in the last 12 months, the biggest jump since 1982