US inflation rises to highest level in nearly 40 years

The US Department of Labor has just announced that the country’s inflation in November 2021 has increased to the highest level since 1982, which has increased pressure on the economic recovery momentum.

Citadel Oulets shopping center, California before Christmas 2022. Photo: AFP

The US consumer price index (CPI) in November increased by 0.8% from the previous month and by 6.8% over the same period last year. This is the fastest growth rate since June 1982.

Excluding food and energy prices, November’s core CPI inched 0.5% from the previous month and only increased by 4.9% year-on-year, but this was still the highest increase since mid-March. At 1991.

Notably, the price of energy products in the US has increased by 33.3% since November 2020, of which November 2021 alone has increased by 3.5%. In particular, gasoline prices recorded a dizzying increase of 58.1%.

Meanwhile, food prices increased 6.1% from a year ago, while prices of used cars and trucks – the main driver of soaring inflation – recorded an increase of 31.4%.

After the US Department of Labor’s inflation announcement, the markets still reacted positively, with Wall Street indexes rising and US Treasury yields falling.

Some economists say the US Labor Department’s inflation report points to the risk that inflation could even surpass the 7% mark.

According to US Federal Reserve (Fed) officials, the increase in inflation is due to factors related to the pandemic. Rising consumer demand coupled with supply chain bottlenecks were the main drivers of inflation, although the rally in commodity prices lasted longer than expected by US policymakers.

“Even removing the extremes caused by the pandemic, inflation remains very high,” said Randy Frederick, managing director of derivatives trading at Charles Schwab. This expert affirmed that the main problem of inflation lies in supply chain disruptions, especially global semiconductor supply disruptions.

Investors have high expectations that the Fed will double its asset purchase cuts to $30 billion a month from January 2022, and this could help the Fed raise interest rates as soon as next spring.

Inflationary pressures are having a heavy impact on American workers. While their gross wages have grown 4.8% over the past year, their real average hourly earnings, taking into account inflation, fell another 0.4% in November and 1.9% over the 12th. last month, according to the US Department of Labor.

Much of the inflation during the pandemic was driven by increased demand for goods, especially vehicles and other durable goods. Excluding energy, service costs rose just 0.4 percent in November and 3.4 percent over the past 12 months, the highest level since April 2007.

With the inflation movements in the past few months, economists believe that US inflation is approaching its peak, especially as energy prices have dropped in recent weeks. Specifically, WTI oil price has increased up to 52% before down 14% in recent weeks.

With unemployment at its lowest level since 1969 and GDP projected to grow strongly by the end of 2021 after a lackluster third quarter, inflation will remain a sore point for the economy’s recovery. US economy.

US President Joe Biden has “paid a political price” after inflation skyrocketed. A recent CNBC survey showed that Biden’s approval rating was only 41% because up to 56% of respondents disagreed with the White House boss’s economic performance.