Inflation up 8.5% in past year, highest since 1981

Bottlenecked supply chains, Russia’s invasion of Ukraine contributing factors

WASHINGTON — Inflation soared over the past year at its fastest pace in more than 40 years, with costs for food, gasoline, housing and other necessities squeezing American consumers and wiping out the pay raises that many people have received.

The Labor Department said Tuesday that its consumer price index jumped 8.5% in March from 12 months earlier, the sharpest year-over-year increase since 1981.

Prices have been driven up by bottlenecked supply chains, robust consumer demand and disruptions to global food and energy markets worsened by Russia’s war against Ukraine. From February to March, inflation rose 1.2%, the biggest month-tomonth jump since 2005. Gasoline prices drove more than half that increase.

Across the economy, the year-over-year price spikes were widespread. Gasoline prices rocketed 48% in the past 12 months. Used car prices have soared 35%, though they actually fell in February and March. Bedroom furniture is up 14.7%, men’s suits and coats 14.5%.

Grocery prices have jumped 10%, including 18% increases for both bacon and oranges.

Investors focused on a bright spot in the report and sent stock prices up: So-called core inflation, which excludes volatile food and energy prices, rose just 0.3% from February to March, the smallest monthly rise since September. Over the past year, though, core prices are up 6.5%, the most since 1982.

“The inflation fire is still out of control,” said Christopher Rupkey, chief economist at the research firm FWDBONDS LLC.

The March inflation numbers were the first to fully capture the surge in gasoline prices that followed Russia’s invasion of Ukraine on Feb. 24. Moscow’s attacks have triggered far-reaching Western sanctions against the Russian economy and disrupted food and energy markets. According to AAA, the average price of a gallon of gasoline — $4.10 — is up 43% from a year ago, though it’s dipped in the past couple of weeks.

The acceleration of inflation has occurred against the backdrop of a booming job market and a solid overall economy. In March, employers added a robust 431,000 jobs — the 11th straight month in which they’ve added at least 400,000. For 2021, they added 6.7 million jobs, the most in any year on record. In addition, job openings are near record highs, layoffs are at their lowest point since 1968 and the unemployment rate is just above a half-century low.

Economists note that as the economy has emerged from the depths of the pandemic, consumers have been gradually broadening their spending beyond goods to include more services.

A result is that high inflation, which at first had reflected a mainly shortage of goods has been emerging in services, too, like travel, health care and entertainment.

Airline fares, for instance, have jumped an average of nearly 24% in the past 12 months. The average cost of a hotel room is up 29%.