Inflation increased by 7 percent last year, the largest increase since 1982.
Inflation Increased by 7 Percent Last Year, the Largest Increase Since 1982.
According to the Labor Department, inflation rose by 7% in 2021, the highest rate in nearly 40 years.
In December, the Consumer Price Index, which measures the cost of a wide range of goods and services, rose 7% over the previous year, albeit the rate of month-to-month rises moderated from prior months. Core inflation, which excludes volatile food and gas prices, increased by 5.5 percent from the previous year.
The spike was fueled by price hikes for accommodation and secondhand autos. According to Edmunds, used car and truck prices increased by 37% last year, with the average used vehicle now costing $29,000. The cost of housing increased by 4.1 percent. Last year, energy expenditures soared by 29% but fell in December due to lower gasoline and natural gas prices.
In a note, Sal Guattari, chief economist at BMO Capital Markets, said, “Another month, another substantial and broad increase in the prices paid by American consumers.”
This type of soaring inflation has never been encountered by younger customers. The last time prices grew so swiftly was in the summer of 1982, as the economy began to recover from the 1970s’ double-digit hikes.
In a report, Robert Frick, corporate economist at the Navy Federal Credit Union, said, “We are definitely at the peak of inflation hikes, but that peak looks months-long until underlying causes such as supply-chain disruptions and the chip shortage are fixed.”
“This is eroding consumers’ purchasing power since real hourly wages have fallen for nine months in a row. Lower-income Americans are the hardest hit, as increasing food and energy prices eat up a larger amount of their earnings “Added he.
Indeed, while earnings have been rising at the quickest rate in decades, especially for lower-paid workers, increases in the cost of essentials have virtually negated those gains.
For much of 2021, politicians referred to growing prices as “transitory,” promising the public that once clogged supply chains were resolved, consumer goods costs would fall. But it hasn’t happened yet.
The surge in demand has been worsened by supply constraints of semiconductors and other parts as Americans have increased their spending on cars, furnishings, and appliances.
High inflation, according to Federal Reserve Chair Jerome Powell, poses a “serious threat” to restoring the job market to full health. Nearly 4 million fewer Americans are employed today than they were before the outbreak.
To combat increasing inflation, the Fed is likely to raise interest rates at least three times this year, though many economists predict four.
According to predictions from the Fed’s most recent meeting in December, the preferred inflation gauge (which accounts for consumers switching to cheaper products) will decrease to 2.6 percent this year, with the nation’s jobless rate falling to 3.5 percent.