US inflation rises to 40-year high
Consumer Price Index reaches 7.0% for the first time since 1982
Inflation in the United States rose to its highest level in four decades in December, according to the US Labor Department.
The US consumer price index rose to 7.0% year-on-year last month, in line with analysts’ forecasts. This constituted the nineteenth consecutive monthly rise in headline CPI and the third month in a row that the annual rate has stood above 6%.
On a month-on-month basis, CPI rose by 0.5%.
Food and energy costs up
The cost of food rose by 6.5% – a marked acceleration from the 1.5% annual average seen in the past decade. Energy costs stood 30% higher than 12 months previous, but fell by 0.4% on a month-on-month basis, the first decline since April. Gasoline inflation reached 49.6% year-on-year.
Core CPI, which does not include food and energy prices, experienced a larger jump than analysts had predicted. The metric reached 5.5%, its highest since February 1991.
Shelter inflation increased to 4.1% year-on-year to its highest level since 2007, while the cost of vehicles continued to surge, with new car prices rising 11.8% year-on-year and used cars and truck prices jumping by 37.3%.
The price of services and goods rose to 3.7% and 10.7%, the latter figure constituting its highest level since May 1975.
Real average hourly earnings experienced their ninth consecutive decline, falling by 2.4% year-on-year.
Responding to the news that the United States now has a higher inflation rate than India and South Africa, President Joe Biden stated: “We are making progress in slowing the rate of price increases. But there is still more work to do – I remain focused on lowering costs for families and maintaining strong economic growth.”
The latest data will come as a further blow to the Federal Reserve and its chairman Jerome Powell, who for much of 2021 argued that inflation above the central bank’s target of 2% would prove to be transitory.
On Tuesday, Powell once again signalled his intention to raise interest rates in the near future to tackle rising costs.