NY TIMES
By Jeanna Smialek
Published Dec. 10, 2021Updated Dec. 11, 2021
Prices are rising at the fastest clip in nearly 40 years, fresh data released on Friday showed, as supply chain disruptions, rapid consumer demand and rising housing costs fuel an inflationary burst.
The spike in consumer costs could spell trouble for officials at the Federal Reserve and the White House, who are trying to calibrate policy at a moment when the labor market has yet to completely heal from the pandemic but price increases are proving more persistent than policymakers had expected.
The Consumer Price Index climbed by 6.8 percent in the year through November, the data showed, the fastest pace since 1982. After stripping out food and fuel, which can move around a lot from month to month, inflation climbed by 4.9 percent. That was the quickest annual reading since 1991.
Monthly price increases — the change between October and November, rather than over the past year — did moderate somewhat, but still rose at an unusually rapid pace.
The question is what happens next. Fed officials have become increasingly concerned about inflation, both because the uptick has lasted longer than expected and because it shows signs of broadening to areas less affected by the pandemic, ramping up the risk that rapid gains could become entrenched.
Earlier this year, price increases were concentrated in goods. Used cars and couches were in demand as the pandemic changed people’s lifestyles. Factories around the world struggled to keep up with the surge in buying, in part because shutdowns tied to the virus upended production. Shipping routes and ports also became clogged as demand followed an atypical pattern, with too many U.S.-bound goods trying to leave Asia in particular. As supply came up short, prices leapt higher.
Those disruptions were expected to be temporary. Instead, they have lasted for months, as demand for products remains strong and the virus continues to disrupt manufacturing and transportation.
Inflationary pressures are also broadening to areas that are not as directly affected by the virus. Rental costs, for instance, have picked up sharply as rocketing home prices lock would-be buyers out of the market. Housing costs make up a big chunk of the Consumer Price Index, so that is helping to boost overall inflation.
The spike in consumer costs could spell trouble for officials at the Federal Reserve and the White House, who are trying to calibrate policy at a moment when the labor market has yet to completely heal from the pandemic but price increases are proving more persistent than policymakers had expected.
The Consumer Price Index climbed by 6.8 percent in the year through November, the data showed, the fastest pace since 1982. After stripping out food and fuel, which can move around a lot from month to month, inflation climbed by 4.9 percent. That was the quickest annual reading since 1991.
Monthly price increases — the change between October and November, rather than over the past year — did moderate somewhat, but still rose at an unusually rapid pace.
The question is what happens next. Fed officials have become increasingly concerned about inflation, both because the uptick has lasted longer than expected and because it shows signs of broadening to areas less affected by the pandemic, ramping up the risk that rapid gains could become entrenched.
Earlier this year, price increases were concentrated in goods. Used cars and couches were in demand as the pandemic changed people’s lifestyles. Factories around the world struggled to keep up with the surge in buying, in part because shutdowns tied to the virus upended production. Shipping routes and ports also became clogged as demand followed an atypical pattern, with too many U.S.-bound goods trying to leave Asia in particular. As supply came up short, prices leapt higher.
Those disruptions were expected to be temporary. Instead, they have lasted for months, as demand for products remains strong and the virus continues to disrupt manufacturing and transportation.
Inflationary pressures are also broadening to areas that are not as directly affected by the virus. Rental costs, for instance, have picked up sharply as rocketing home prices lock would-be buyers out of the market. Housing costs make up a big chunk of the Consumer Price Index, so that is helping to boost overall inflation.