The Economy

U.S. Inflation Surges at Highest Rate Since 1982

The 7% increase in the CPI last month indicates there is "still tremendous momentum when it comes to inflation right now."
Matthew HellerJanuary 12, 2022

U.S. inflation rose in December at the fastest rate in nearly 40 years as price gains spread beyond a few pandemic-disrupted categories to such areas as shelter costs.

The Labor Department reported Wednesday that the consumer price index (CPI) increased 7% last month on a year-to-year basis, matching economists’ expectations. It was the biggest CPI gain since June 1982 and the third straight monthly jump of more than 6%.

Excluding the often-volatile categories of energy and food, core inflation rose 5.5%, the highest rate since 1991.

“There is still tremendous momentum when it comes to inflation right now. While inflation is likely to peak in the next few months, the overall pace is going to remain a challenge for consumers, businesses, and policy,” Sarah House, senior economist at Wells Fargo, told The Wall Street Journal.

As The New York Times reports, “Policymakers have spent months waiting for inflation to fade, hoping supply chain problems might ease and allow companies to catch up with booming consumer demand. Instead, continued waves of the coronavirus have locked down factories, and shipping companies have struggled to work through extended backlogs as consumers continue to buy foreign goods at a rapid clip.”

In December, prices for autos, furniture, and other durable goods continued to drive much of the inflationary surge, with prices of used cars and trucks soaring 37.3%.

Gasoline prices fell 0.5% in December from November but food inflation remains elevated, rising 0.5%. Rental inflation increased 4.1%, the highest rate since 2007, and restaurant meals were more expensive, indicating the impact of higher wages.

“That price increases are becoming more widespread — and creeping into areas that are not so directly affected by the pandemic — is a worrisome development for economic policymakers,” the Times said.

Constance Hunter, chief economist at KPMG, expects the booming demand for goods to reverse in the first half of 2022, easing overall price pressure. “I do think we’ll get back to some semblance of normal as people run through their savings and, hopefully, as we move past omicron,” she said.

On a monthly basis, the CPI increased 0.5% in December, decelerating from October and November.