Inflation in the US is growing faster, reaching 7,5 percent on an annual basis in January, which is the highest growth since February 1982, canceling the effects of rising wages and strengthening the Federal Reserve's decision to raise interest rates, AP reports.
On a monthly level, price growth reached 0,6 percent, as was the case in December last year, the Ministry of Labor announced on Thursday, February 10.
Prices are rising rapidly throughout the economy, from food and furniture to housing, airline tickets and electricity.
Shortages of supplies and workers combined with heavy federal aid, ultra-low interest rates and strong spending have sent inflation soaring in the past year, and there is little sign that it will slow down much anytime soon.
Wages are rising at their fastest pace in 20 years, which may pressure companies to raise prices to cover higher labor costs. Ports and warehouses are overstretched, as hundreds of workers at the ports of Los Angeles and Long Beach, the nation's busiest, were absent last month due to illness. Because of this, there were shortages of many products and spare parts.
Apartment rental costs rose by 0,5 percent in January, the fastest pace in the last 20 years. Electricity prices rose by 4,2 percent in January alone, which is the highest growth in the last 15 years and by 10,7 percent more than a year earlier. Last month, furniture and household goods rose 1,6 percent, the largest one-month increase since 1967.
Airline ticket prices increased by 2,3 percent. New car prices, which have soared during the pandemic due to computer chip shortages, were unchanged last month but rose 12,2 percent from a year ago. This in turn accelerated the rise in used car prices; by 1,5 percent in January and a dizzying 41 percent compared to a year ago.
As prices continue to rise, many Americans are less and less able to afford food, gas, rent, childcare and other necessities. More broadly, inflation has emerged as the biggest risk factor for the economy and a serious threat to President Joe Biden and Democrats in Congress in the midterm elections later this year.
Among Americans struggling with more expensive food and gas is Courtney Lackey, who has changed her shopping habits and is working extra at a grocery store in Charlotte, North Carolina, where she lives.
Laki (33) used to be able to fill up a cart at the grocery store for $100. Now, he says, barely half the cart for the same sum. Tomatoes have reached almost $5 a pound (450 grams), "which I think is crazy," Lucky says. She switched to canned tomatoes and to use coupons intended to help the poorer population.
Over the past year, skyrocketing gas, food, car and furniture costs have strained the budgets of many Americans. In December, economists at the Wharton School of the University of Pennsylvania estimated that the average household had to spend $3.500 more than in 2020 for an identical amount of goods and services.
Thursday's report will increase pressure on the Fed and its chairman, Jerome Powell, to tighten borrowing conditions to slow inflation. Powell signaled two weeks ago that the central bank is likely to raise its benchmark short-term rate several times this year, the first of which will almost certainly come at its next meeting in March.
Given the latest inflation data, some economists and investors say the Fed could raise the key rate in March by half a percentage point, rather than the usual quarter.
Over time, higher rates will increase costs for a wide range of borrowing, from mortgages and credit cards to car loans and business needs. That could cool spending and inflation, but there is a risk for the Fed that continued tightening of borrowing conditions could trigger another recession.
Last week, the average rate on a 30-year fixed mortgage jumped to 3,69 percent, the highest in two years. The increase in interest rates will discourage some potential property buyers.
Many large corporations expect supply shortages to last until at least the second half of this year. Companies from Chipotle to Levi's have also warned they are likely to raise prices again this year, after doing so in 2021.
Chipotle said it raised menu prices by 10 percent to offset rising beef and transportation costs, as well as higher employee wages. The restaurant chain said it would consider raising prices further if inflation continues to rise.
Executives at Chipotle, as well as Starbucks and some other companies, point out that their customers so far don't seem upset by the higher prices.
Company Levi Strauss & Co. it raised prices last year by 7 percent above 2019 levels due to rising costs, including labor, and plans to do so again this year. Despite this, the San Francisco-based company improved its sales forecasts for 2022.
"Right now, every signal we're seeing is positive," CEO Chip Berg said.
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