Are prices up? Inflation reaches highest level since 1982, consumer prices jump 7 percent in 2021
Another month, another record-setting leap in prices.
Inflation hit a fresh 39-year high in December as a drop in energy costs wasn’t enough to offset a steady march upward for staples such as food, rent and cars amid stubborn supply-chain bottlenecks and worker shortages.
The consumer price index jumped 7 percent last year, the fastest pace since 1982, the Labor Department said. That's up from 6.8 percent annually in November, which was also a nearly four-decade high.
COVID-19’s fast-spreading omicron variant likely intensified the price increases by spawning more worker absences in global delivery networks and slowing shipments, says Wells Fargo economist Sam Bullard. That more than erased any easing of demand and prices in COVID-19-sensitive industries like travel, Bullard says.
Excluding volatile food and energy items, so-called core prices rose 5.5 percent in 2021, a new 30-year high. On a monthly basis, overall consumer prices increased 0.5 percent in December while core prices advanced 0.6%.
Will overall inflation ease?
Economists expect overall inflation to ease in coming months as gasoline and other energy prices continue to pull back and crude oil prices fall. But core inflation is expected to drift higher before edging down as the supply snags are ironed out.
"Buckle up," says economist Leslie Preston of TD Economics. "After reaching new highs core inflation is likely to get even higher in the first quarter of 2022 on a year-on-year basis."
Will gasoline prices go down?
Last month, energy prices declined for the first time in six months, dipping 0.4 percent, with gasoline prices falling 0.5 percent. That still left pump prices up 49.6 percent the past year.
But other costs continued to climb. Hotel rates leaped 23.9 percent annually. Used car and truck prices rose 3.5 percent monthly and 37.3 percent for the year. Prices increased 11.8 percent annually for new cars, 7.4% for household furnishings, 5.8 percent for apparel and 6.3 percent for groceries.
Chicken and fish prices jumped 10.4 percent and 8.4 percent, respectively, over the past year after further monthly advances. Beef was up 13 percent and pork, 15.1 percent, despite dips last month.
Food prices up, shelves empty
Additional food price increases may lie ahead with reports of empty store shelves in the Northeast as a result of omicron-related worker absences and winter storm disruptions, says economist Paul Ashworth of Capital Economics.
The pandemic has been behind the stomach-churning inflation.
Consumers who were already snapping up goods such as TVs and appliances while stuck at home during the health crisis began dining out and traveling more. Many were ready to splurge after they built up more than $2.5 trillion in additional savings from federal stimulus checks and enhanced unemployment benefit, as well as cutting back during the lockdowns.
Supply snags hit consumer price index
But a supply network still hobbled by the pandemic wasn’t prepared for the buying binges. Many overseas factories are running at partial capacity. Shipping containers are in short supply. And many truck drivers and warehouse workers are still caring for kids at home or fearful of contracting COVID-19.
The rare collision of robust demand and skimpy supplies has triggered widespread product shortages and higher prices that are outpacing solid wage increases for low- and middle-income Americans.