Prices Climbed 6.8% in November Compared With Last Year, Largest Rise in Nearly 40 Years

WASHINGTON (Washington Post) -
The MSC Kalina shipping container is moored at Maersk APM Terminals Pacific at the Port of Los Angeles Tuesday, Nov. 30, 2021. (AP Photo/Damian Dovarganes)

Prices rose at the fastest pace in nearly 40 years last month, increasing 6.8% over the same period a year ago, as inflation continues to squeeze households and businesses nationwide and complicates the political environment for Congress and the White House.

Consumer price index data released Friday by the Bureau of Labor Statistics showed that prices rose 0.8% in November compared with October, with inflation spreading further throughout the economy, including to areas that had not been as affected by the coronavirus pandemic.

The November data marked the largest 12-month increase since June 1982, during a period when inflation was more of a scourge on daily life than most millennials have ever known. Current inflation dynamics have been spurred by a devastating pandemic that roiled the global economy, upsetting the workforce and supply chains, while stimulus measures helped unleash high demand for goods.

The broad-based increases span just about every sector, from pork, poultry and produce to housing and sporting goods. Companies large and small are raising prices or making tough decisions to make up for the rising costs of hiring, transportation and basic goods. Even Dollar Tree, which has long sold items for $1, is hiking prices to $1.25.

The November increases were driven by broad-based price hikes in most of the categories tracked, similar to October inflation. Indexes for gasoline, shelter, food, used cars and trucks and new vehicles were among the larger contributors. Airline fares also increased in November, rising 4.7% from October after declining over the previous few months as people geared up for holiday travel.

Roughly half of the month-over-month increase in the consumer price index was due to price increases in cars and energy. The energy index was up 3.5% in November, and measures of gasoline were up 6.1%. Recent moves by the Biden administration intended to bring prices down at the pump are not reflected in Friday’s data.

The cost of medical care has risen in four of the past five months, although it grew at a slower pace in November than October.

Federal data showed that prices for “food at home,” namely groceries, were up 6.4% in the past year and that the cost of “food away from home” climbed 5.8%. Steak was up almost 25% compared with a year ago, and bacon 21%. Eggs were up 8%, apples 7.4% and flour roughly 6%.

Friday’s inflation report showed rent was up 0.4% in November compared with the month before, and 3% compared with last year, in part because of soaring home prices and supply chain issues limiting construction of new homes. Economists say that hikes in housing are concerning, especially since rent and home prices make up large shares of household budgets and are not expected to ease, even after the pandemic eases or global supply chain snarls clear up.

Rent and shelter costs tend to be “much stickier than, say, fuel or food or industrial supply components,” said Joe Brusuelas, chief economist at RSM. “This is the channel through which a possible wage-price spiral starts because it reduces disposal personal income.”

By many measures, the economy has made tremendous progress since it was thrust into a recession in early 2020. The labor market has added 6 million jobs since Biden took office. Economic growth is surging far faster than most economists forecast earlier in the pandemic. The stock market is also up roughly 25%.

But inflation has proved to be one of the most visceral ways people judge economic recovery from the pandemic. White House officials have been frustrated by a disconnect between such strong progress and a public discontent that is showing up in opinion polling and Biden’s approval ratings.

In recent months, Federal Reserve policymakers have had to ditch their long-held message that inflation is limited and temporary, as that conflicted with what’s been unfolding nationwide. The Fed’s main policy tool for blunting inflation is raising interest rates, which cools the overall economy down and slow growth in part by raising the cost of loans and business investment. Economists increasingly expect the Fed will hike rates as early as next spring, much faster than projected earlier this year.

Meanwhile, financial markets appeared to shrug off the November inflation news, with the Dow Jones industrial average and the tech-heavy Nasdaq up slightly on Friday.

There are also renewed concerns about workers’ wages and how the basic cost of living could begin to lag behind inflation. Stagnant wages haunted the country for years, but the pandemic recovery brought in a new era that gave workers more leverage and contributed to better earnings for rank-and-file workers, which grew at the fastest pace in decades. Stimulus checks and other government benefits, like the child tax credit, are also helping cushion households’ savings and balance sheets.

Yet, the rising cost of goods and services is cutting into those gains, especially for households without much room to stretch their budgets. Food banks around the country report that families are continuing to show up for meals and groceries, as they weigh whether to pay for gas, rent, food or medication.