Prices rose 6.8% in the year to November with the cost of fuel, used cars and food rising fastest.
Image source, Getty Images
Prices for American consumers are rising at their fastest annual rate since June 1982.
The consumer price index (CPI) rose 6.8% in the year to November according to the latest figures from the Bureau of Labor Statistics.
Petrol prices jumped 6.1%, while the cost of second-hand cars, rent and food also rose.
However the monthly pace of price rises at 0.8% in November was slightly lower than October’s 0.9%.
Rising inflation is putting pressure on President Biden’s political agenda as he tries to pass his $1.9tn (£1.4tn) social spending bill.
On Thursday, the president made the unusual move of attempting to diffuse the impact of the latest figures ahead of their release, saying the data would not reflect recent declines in the price of energy and used cars.
“The information being released tomorrow on energy in November does not reflect today’s reality, and it does not reflect the expected price decreases in the weeks and months ahead, such as in the auto market,” the president said.
Shoppers, especially those on low incomes are feeling the pinch of higher prices.
Bibi who works as a cleaner in Harlem, New York, says sometimes she buys one meal, and shares it with her 27 year old son.
“We don’t have any choice,” she says, “I can’t afford to cook.
“I take a little bit then I give him more because the mother always going to do that for her child.”
Price rises are eating into her shopping bills: “Gas went up when gas goes up everything goes up,” she says.
Patricia, who has just shopped in the local supermarket says her shopping is costing about $30 a week more than it was before, so she’s replacing chicken and pork chops with more vegetables, although prices for fresh produce are also higher she says.
“It affects me a lot right now – I’m not working,” she says.
Maria has just retired and says she’s noticed that what she buys is not only pricier but often smaller too, especially the bagels.
“I’m not going to buy them again for a long time. They used to be big bagels, now they’re smaller and more money,” she says.
Inflation has become a potentially damaging political issue for President Biden. It affects ordinary voters directly. And some economists blame the president’s spending programmes designed to offer support amid the Covid pandemic, for exacerbating price increases.
However bottlenecks in the supply chain remained a key source of inflationary pressure, said Caleb Thibodeau, at Validus Risk Management.
“Regardless, the political pressure on President Biden, and hence the Fed, to acknowledge and act has grown immensely,” he said.
Fuel, shelter and used vehicles made up over half of the 6.8% figure, he said. “These are factors that could ease quickly, as we have seen recently in oil markets, but remain persistent for the time being.”
Excluding the volatile food and energy components of inflation, the CPI index is 4.9% higher year on year, up from 4.6% in October.
Inflation, triggered by a combination of higher demand from consumers and supply chain problems, was initially expected to fade as disruptions were smoothed out.
But price rises across a broad range of goods, coupled with rises in rents and wages, have persuaded many economists that inflation will persist for longer.
Both Treasury Secretary Janet Yellen, and Federal Reserve Chair Jerome Powell have said recently they would no longer refer to inflation as “transitory”.
The Federal Reserve is reducing the bond-buying support it provides every month, paving the way for a possible rise in interest rates next year.
The higher inflation rate has fuelled speculation that Mr Powell will speed up the tapering of that support and raise rates sooner.
“While the cost of living is going up and up, all support measures have expired and no new ones have been introduced, which will likely dent consumer confidence. And rising rental equivalent costs continue to spiral in the background, indicating longer-term inflationary problems,” said Robert Alster, chief investment officer at Close Brothers Asset Management.
“But the global economy is at a serious juncture thanks to the emergence of the Omicron variant this month. Only time will tell what the impact will be, and how far it will upset the Fed’s plans in the new year.”