U.S. Inflation Accelerates to 40-Year High - WSJ
S E E D E D C O N T E N T
U.S. inflation accelerated to a 7.5% annual rate in January, rising to a new four-decade high, the Labor Department said Thursday.
The January number includes a once-a-year revision that affects seasonally adjusted data for the past five years. The Labor Department also updated the list of goods included in the calculation, known as a spending basket, to reflect consumer habits in 2019 and 2020.
Prices for autos , household furniture and appliances , as well as for other long-lasting goods, continue to drive much of the inflationary surge, fueled by pandemic-related supply-and-demand imbalances. Most economists expect the dynamic to fade as businesses adapt and demand normalizes. But it isn’t clear when supply snarls will ease enough to take pressure off prices, particularly because of recent disruptions from the Omicron variant of Covid-19.
Food inflation is also raising consumers’ grocery bills , pushed up by steady price increases for meat , eggs and citrus fruits. Energy-price gains had shown signs of easing after climbing steeply last year. But a recent sharp rise in crude oil prices threatens to keep gasoline prices elevated.
High inflation is the dark side of the unusually strong economy, posing a challenge to the Federal Reserve as it tries to quell rising prices without damping growth.
“This is not encouraging news for the Fed in its battle to get inflation heading back towards the 2% target,” said James Knightley, chief international economist at ING. “Rate hikes will do nothing to resolve supply chain strains and worker shortages, but they can contribute to taking some of the steam out of the economy and allow demand and supply to start moving towards a better balance, at the expense of weaker growth.”
The economy expanded 5.5% last year , the fastest pace since 1984. That brisk growth is powered by a strong labor market . Employers added 1.6 million jobs over the past three months, putting upward pressure on wages. With inflation well above the Fed’s target, the steady gains in hiring leave the Fed on track to raise interest rates next month and could prompt further increases in May and June.
Mounting wage pressures related to the nation’s tight job market could also start feeding into inflation. Annual wage growth was running at 4.5% in December, the fastest pace since 2002, according to the Federal Reserve Bank of Atlanta’s wage tracker , which makes adjustments for changes in the composition of workers.
A steady pickup in rental costs, which account for nearly one-third of the CPI, is adding to inflationary pressure and will likely keep doing so, said Aichi Amemiya, senior U.S. economist at Nomura Securities.
The rental vacancy rate dropped to 5.6% in the fourth quarter, its lowest level since the 1980s. Mr. Amemiya said such a low vacancy rate could push housing rents even higher as new lease contracts are signed this year, putting more pressure on inflation.
Allison Reyes and her boyfriend, Patrick Oldt, had been in a new apartment located close to the Schuylkill River in Philadelphia’s Center City for four months when the basement flooded from high water after Hurricane Ida. That sent the couple looking for a new place to live—and gave them sticker shock because prices for similar rental properties were 30% more expensive than just a few months ago.
“We were shocked. We were looking at the exact same apartments we had looked at just a few months earlier whose prices had gone from $2,400 a month to $3,000 a month,” said Ms. Reyes, 34 years old, who works as a brand manager. “We ended up having to downgrade in size and location. Now we’re spending more money for a smaller apartment by about 400 square feet.”
In December, some 47% of small businesses said they planned to raise prices in the next three months, on net, according to the National Federation of Independent Business, a trade association. That figure is down slightly from the last three months of 2021, but close to the highest share since monthly records began in 1986.
Alex Mishkit launched her salon, Alex Cher Beauty, a year ago. Since then, she has increased prices to keep up with the rising costs of key supplies. First it was the nitrile gloves, which leapt as much as 30%. Then the price of waxing sticks shot up, followed by the price of wax itself, which rose by around 15%.
“To a small-business owner going on her second year, it adds up. So I’m hyper-aware of the slightest increase because every dollar counts,” she said. With overall supply costs running between 10% and 15% more than they were when she opened her doors, Ms. Mishkit in December nervously announced a price increase of around 10%. To her surprise, she said, customers were supportive.
“I was definitely taken aback by the positive responses I received from clients,” she said, adding that it made sense given how consumers’ expectations have changed over the past year. “I mean, just turn on the news and it’s all about inflation. So I don’t think there’s a shock when there’s a slight price increase.”
Mr. Amemiya of Nomura Securities said that rising inflation expectations among consumers, along with wage increases across the labor force, add to the risk that price pressures remain persistent. That could encourage the Fed to raise rates more than expected even if the overall inflation trend declines in the coming months, he said.
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Explain that away Joe & Jen!
Although the price of gas at the King Sooper (Kroger) pumps has slowly come down to $3.12, the prices inside the store have skyrocketed in all departments since the beginning of the year.
What was it that Joe Biden said during the outrage over food prices during Thanksgiving?
How about a hot dog?
Price of gas at my local QT jumped to $3.29 from $3.09 last week...............WTH is going on?
$3.29- my neck of the woods is $3.39 this week at most stations.
I filled my heating oil tank 1/24/21 at 1.89 a gallon the price today is 3.70 a gallon. That's a 1.81 increase almost double the price. Basically at this price it would be cheaper to heat with electric space heaters.
Try $4.59 a gallon for 87 grade gas as the average where I live.
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$3.45 a gallon right now down here on the border.
Morning Ed.. petrol here is a $1.80 a litre at the moment... and in New Zealand it is $3 a litre... just as we they don't have large distances to travel..
Currently $1.42 p/litre here (approx $5.68 p/gallon) and I live in the cheapest gas province in Canada (although nowhere is at $1.80)
Yes normally we are around $1.40 a litre but they put up the price for any reason...
Latest excuse Russia/Ukraine the corona virus, US stock exchange falls and rises, US elections, China/Taiwan and anything else they can think of..
Well I am off for a walk along the beach...have to make the most of it.. Autumn is already in the air and summer is on the run.
Enjoy yourself, I'd do the same but it's -10 and I'd have to walk through 4 ft of snow
Internet says $3.09 to $3.14 here in DFW
but we passed several at $2.82 - $2.94 Thursday
According to AAA the US average for regular unleaded is 3.49. A year ago it was 2.51.
Nearly a 40% increase in one year.
Now that is some serious inflation for Americans who have to drive every day.
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I hardly drive at all, how about you?
I hardly drive at all, how about you?
Not a surprise considering
Roughly 20,000 miles a year. Tack on total miles company wide and it’s closer to 700k miles a year.
Do you care only about your issues or do you also care about others issues as well?
I understand that.
When is the last time he got a raise or asked for one?
In the 50's and 60's my Mexican MIL made doilies and had my brother in law sell them
at an exit ramp red light. When she told my FIL, an LA City Engineer,
we're moving, he said "we can't afford it". "There will be trouble".
She retrieved a shoe box with thousands of $5's and ones.
Mexicans, even WWII Army vets missing a few fingers could not buy a house on credit.
They bought a house cash but didn't last long, the white BSA leader next store tormented them,
poisoned the dog etc.
She remodeled the house, sold it for a handsome profit and bought a large corner property
with roses, citrus trees and avocados. They sold it for $500K in the late 90's moved to TX and bought a
similar property for $85K.
Gotta love TX.
Same excuse TFG used.. Covid.
West Virginia has a great Senator there. Better than a lot of other Rep and Dem Senators.
I hope he continues to stay the course.
Food, gas, rent, interest rates on loans all going up..
Democrats do nothing but obsess about Trump. No wonder Republicans are enjoying their biggest partisan advantage in years.
I guess they are walking and chewing bubble gum at the same time eh? /S
Inflation is real and corporate profits, especially OIL is at the highest's recorded levels.
Most companies set their price as total cost of production plus (let's say 20%) so if inflation drives up costs (raw materials, labor, shipping, energy, real estate) it also drives up profit leading to record profits. That's not to say some companies aren't gouging but for most it's just simple math, they consider cost as an investment and so they set what they think is a reasonable rate of return. So as costs increase so must profit increase which leads to increases in the cost of whatever product they're selling.
Really? "As costs increase so must profit increase..............................................." Okay. Then why did the taxpayers bail out the Banks and Wall Street in 2009-2011? Why didn't they just increase their profits to cover the costs? Yeah. As if that makes any sense.
Your supposition is--------------wrong.
Your understanding of basic economics is rather obtuse.
So banks make most of their money by charging interest on loans. Personal and Commercial. They couldn’t have raised those interest rates enough to bail themselves out and still expect people to take out more loans to actually pay for it.
This isn’t a defense of banks, I think they should have let them fail. But it’s also not a defense of government who enabled banks to write such garbage paper.
A problem that transcended political party.
Economics 101 .... a simple math problem really. If a business is charging a fixed percent profit on a product and the cost of the product goes up. Does the company make more money in profit before or after the cost went up?
This isn't "adding" jobs. This 1.6 million are people getting back to work. And even at that, it's only slightly over 25% of the people who quit their jobs in latter half of 2021. Many of those who quit wanted higher wages. In many cases their wages did go up, so did inflation wiping out any benefit of a higher wage.
And this administration is doing very little to correct it.
I am reminded of a movie clip somebody posted on another article a few days ago from Clint Eastwood's The Outlaw Josie Wales. Wale's former captain is telling a US Senator something about "...pissing on his back and telling him it's raining." Definite similarities with the Biden administration and the American public!
What only a few months ago was “transitionary” according to the Biden admin, is now dug in like a tick on a hound. Energy is “the” largest single driver of inflation in the World and with energy cost up 30-50% right now, high inflation ain’t down any day soon.
Biden’s temporary inflation bandaid of suggesting a moratorium on federal gas taxes is proof of that. He is grasping at straws now because of his restrictive energy policy. He’s an inflation driving lost banana.