U.S. Inflation Report 2021: Prices for consumers rose 6.8% over the past year, driven by soaring costs of autos, housing, food

WASHINGTON – Prices for U.S. consumers rose 6.8% in November from a year earlier as soaring costs of food, energy, housing and other items sent Americans into the fray. highest annual inflation since 1982.

The Labor Department also reported on Friday that from October to November, prices rose 0.8%.

Inflation has been increasing pressure on consumers, especially low-income households, and especially for daily necessities. It also negates the higher wages many workers receive, complicating the Federal Reserve’s plan to cut aid to the economy and at the same time as the public flagging the President’s support. Joe Biden.

Fueling inflation is a combination of factors driven by the rapid recovery from the pandemic: a series of government stimulus measures, ultra-low interest rates introduced by the Fed, and supply shortages in major markets. factories in the US and abroad. Manufacturers have been slowed by higher-than-expected customer demand, COVID-related shutdowns, and overloading ports and freight yards.

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Employers, grappling with a shortage of workers, have also raised wages, and many of them have raised prices to offset their higher labor costs, thereby adding to inflation. .

As a result, prices for items ranging from food and used cars to electronics, home appliances and rental cars have skyrocketed. The price surge, which began in the wake of the pandemic as Americans stranded at factories flooded with orders to buy goods, has spread to services ranging from apartment rent to restaurant meals. to health and recreational services.

The persistently high inflation has surprised the Fed, whose chair is Jerome Powell, for months calling inflation “transient,” a short-term consequence of congested supply chains. Two weeks ago, however, Powell signaled a shift, tacitly acknowledging that high inflation has persisted for longer than he expected. He suggested that the Fed will likely act faster to phase out its ultra-low interest rate policies than previously planned.

Some economists are raising hopes that inflation will peak in the coming months and then gradually ease and ease consumer stress. They note that supply shortages in some industries have begun to subside. And while higher energy costs will continue to weigh on consumers in the coming months, Americans likely won’t be left out of earlier forecasts that energy prices will hit record highs this season. winter.

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Oil prices are falling slightly and leading to a slight decrease in gasoline prices. According to AAA, an average gallon of gasoline costs $3.38, down from $3.42 a month ago.

More surprisingly, natural gas prices have fallen nearly 40% from their seven-year highs reached in October. As a result, although average home heating costs will exceed last year’s levels, but they will not increase as much as once feared.

Food prices may also decline as corn and wheat prices have fallen sharply from their highs at the start of the year.

The average cost to heat a home this winter is estimated at $972, said Mark Wolfe, executive director of the National Association of Energy Support Directors. That’s lower than the $1,056 his team had expected in October, though still higher than the $888 average consumers paid to heat their homes last year.

Several factors have combined to lower energy prices in recent weeks. Unusually warm weather has helped drive down future natural gas prices. In addition, the United States and several other major countries have agreed to release oil from their strategic reserves. And OPEC + the oil cartel reached an agreement to release more oil in January.

Furthermore, the emergence of the omicron variant of the coronavirus has renewed the prospect of more canceled or postponed travel and fewer restaurant meals and shopping trips. All of that, if it happens, will slow consumer and business spending and potentially curb inflation.

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However, analysts still warn that unexpected developments, including major winter storms, with the potential to increase energy demand, could cause energy prices to rise again.

And analysts warn that easing overall inflationary pressures will depend on further progress in normalizing global supply chains. Senior White House officials said they believe a range of actions have been taken by the administration, from ramping up cargo handling from the ports of Los Angeles and Long Beach to the release of crude oil from storage. petroleum reserves, which will help alleviate inflationary pressures. .

Some outside economists have begun to echo that view.

“I think November is going to be the worst month, and going into the future we should see a steady improvement,” said Mark Zandi, chief economist at Moody’s Analytics. “As the delta COVID wave has subsided and supply chains begin to repair themselves, we will begin to see production and shipments improve.”

Zandi said he believes inflation will start to improve with the December price report and that by this time next year, annual inflation should be back around 3%, close to the Fed’s 2% target.

For now, however, amid persistently high inflation, the Fed is expected to announce after its meeting next week a rapid reduction in monthly bond purchases. These purchases are aimed at reducing long-term borrowing costs.

Doing so puts the Fed on track to start raising key short-term rates as early as the first half of next year. That rate has been pegged at near zero since March 2020, when the coronavirus sent the economy into a deep recession.

Copyright © 2021 by Associated Press. Copyright Registered. U.S. Inflation Report 2021: Prices for consumers rose 6.8% over the past year, driven by soaring costs of autos, housing, food

Dais Johnston

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