Inflation in the US hits its highest in 30 years

Consumer prices in the United States rose more than expected in October, with rising fuel and food costs leading to the biggest annual gain since 1990, signaling that inflation could remain high until next year amid global problems in supply chains.

The consumer price index rose 0.9% last month, after rising 0.4% in September, informed the Department of Labor this Wednesday (10). In the 12 months to October, the index increased 6.2%, the biggest annual increase since November 1990, after a 5.4% jump in September.

Excluding the volatile components of food and energy, the index rose 0.6% after rising 0.2% in September. The so-called core inflation jumped 4.6% year-on-year, the highest since August 1991, after remaining at 4.0% for two consecutive months. Economists polled by Reuters had predicted a 0.6% increase for the index and 0.4% for core inflation.

US President Joe Biden said on Wednesday that reversing the inflationary trend is a priority.

“Inflation hurts Americans’ pockets and reversing this trend is a priority for me,” he said.

“The threat of record inflation for the American people is not ‘transient’ and rather is getting worse,” said Democratic Senator Joe Manchin.

“From the supermarket to the gas station, Americans know inflation is real and (Washington) DC can no longer ignore the economic pain Americans feel every day,” he added.

Republican members of the House of Representatives Committee on Commerce and Energy said the United States faced “Bidenflation.”

“Spending billions more on taxes and spending will only make the crisis facing Americans worse,” they tweeted.

Inflation is heating up again as the economic burden of the Northern Hemisphere summer’s wave of Covid-19 infections, driven by the Delta variant, weakens and supply bottlenecks persist. Trillions of dollars in pandemic relief provided by governments around the world have fueled demand for products, leaving supply chains strained.

The nearly two-year pandemic has affected labor markets, causing a worldwide shortage of workers needed to produce raw materials and transport goods from factories to consumers.

The US government informed on Tuesday (9) that producer prices rose sharply in October, reversing the deceleration trend in the monthly index that had been consolidated since the spring in the Northern Hemisphere.

While the Federal Reserve last week reaffirmed its belief that the current high inflation “should be transitory,” most economists are skeptical, noting that wages are rising sharply as companies scramble to find workers.

“The disruptions in supply and the recovery in services pose a substantial concern that higher-than-expected inflation may persist longer than the Fed believes,” said Sam Bullard, senior economist at Wells Fargo.

“We expect goods inflation to give the baton to services over the next year, but all signs indicate that supply chain bottlenecks will continue to fuel inflation in the near term.”

The Fed this month began reducing the amount of money it is pumping into the economy through monthly bond purchases. The US central bank’s preferred inflation measure for its flexible 2% target rose by 3.6% in September year-on-year.

With the shortage of labor, companies are keeping their workers. In another report released on Wednesday, the Labor Department said initial jobless claims fell by 4,000 to 267,000 in seasonally adjusted data for the week ended Nov. 6th.

That was the lowest level since mid-March 2020, when the economy nearly came to a halt amid mandatory US business closures aimed at slowing the first wave of Covid-19 infections. Claims, which have been declining for six consecutive weeks, are very close to their pre-pandemic level.

The report was released a day earlier because the US government will be closed on Thursday for the Veterans Day holiday.