U.S. inflation rose at the fastest rate in nearly 40 years in November, providing further evidence of the pandemic’s disruptive effects on supply and demand.
The Labor Department reported Friday that the consumer price index (CPI) jumped 6.8% last month from a year ago, the biggest gain since 1982 and the sixth straight month that inflation has topped 5%.
Excluding food and energy prices, so-called core CPI was up 4.9% from a year ago, the sharpest pickup since mid-1991. Dow Jones had estimated a 6.7% gain for headline CPI and 4.9% for core.
“There’s no question no matter how you look at it, even if you take out the extremes caused by the pandemic, it’s still very high inflation,” Randy Frederick, managing director of trading and derivatives at Charles Schwab, told CNBC. “This is still supply chain disruption, semiconductor-related inflation.”
According to The Wall Street Journal, “The latest strong inflation report strengthens the case for Federal Reserve officials to commit to hastening the wind-down of their stimulus efforts, paving the way to raise interest rates in the spring to curb inflation.”
However, on a month-to-month basis, inflation increased 0.8% in November, below the 0.9% gain in October, and according to the Journal, “Economists generally see inflationary pressure from supply constraints easing in 2022 as sidelined workers return, consumer demand for goods cools, and production ramps up.”
The November increase was led by a 33% jump in energy prices, with gasoline alone up 58.1%. The 11.1% increase in prices for new vehicles was the largest on record, as were the gains for men’s apparel and living room, kitchen, and dining room furniture.
“We have tremendous spending by consumers. A lot of people are getting hired. Demand is huge,” Allen Sinai, chief global economist and strategist at Decision Economics, said.
Aichi Amemiya, senior U.S. economist at Nomura Securities, said a continuing shift in consumer spending from goods to services should also help calm inflation. Additionally, while West Texas Intermediate oil is up more than 52% in 2021, the price has dropped about 14% from its most recent peak in November.