Prices climbed 6.2% in October compared with last year, the largest rise in 3 decades
Prices rose 6.2% in October compared with a year ago, the largest annual increase in about 30 years, as rising inflation complicates the political agenda for the White House and policymakers’ road map for the economy heading into the end of the year.
The growth in October prices reported Wednesday by the Bureau of Labor Statistics (BLS) was driven by soaring energy prices and supply-chain backlogs, such as those in the usedcar market. Gasoline prices are up 49.6% from a year earlier, and higher energy costs are pushing up the prices of just about every other good, economists say, pinching an already strained supply chain.
A surge that began in narrow sectors now appears to be spreading throughout the economy, with the BLS noting “broad-based” high“This er prices propelled by not just energy and used cars, but also by shelter, food and new vehicles. Prices for medical care, household furnishing and operations, and recreation all increased in October.
Overall prices rose 0.9% from September to October, tying June for the biggest one-month increase since the Great Recession. Only a few categories saw prices fall last month, including airfare and alcohol.
The data underscores how inflation has emerged as a controversial political and economic issue during the pandemic era. For years, inflation remained tamely below the Federal Reserve’s 2% annual target and off politicians’ radar. But the clash of supply chain backlogs, labor shortages, and ongoing uncertainty amid a public health crisis has turned inflation into a crucial test for policymakers and economists – and it’s unclear when that will change.
was the first number that very clearly was not ‘temporary shortage’ driven,” said Adam Posen, president of the Peterson Institute for International Economics, suggesting that the pandemic-era supply shortages are no longer the sole, overwhelming force. “There were things that are no longer short, coming back up in price. Services that by definition aren’t really short, coming up in price.”
The latest snapshot of higher prices comes at a tense time for the Biden administration, as it tries to corral support for a $2 trillion social spending package. On Wednesday morning, a key Democrat needed for the bill, Sen. Joe Manchin of West Virginia, raised new concerns about inflation, building on his earlier warnings about more government spending.
President Joe Biden tried to assuage these fears Wednesday, highlighting good news in the economy – including lower weekly claims for jobless benefits – while also suggesting his economic agenda, including the package Congress recently passed to boost infrastructure spending, will bring down prices.
“Inflation hurts Americans pocketbooks, and reversing this trend is a top priority for me,” Biden said in a statement.
But officials at the White House and the Fed have for months asserted inflation will be a temporary, or “transitory,” feature of the economy. They argue that the price increases are driven by supply chain backlogs that have constrained auto manufacturing, housing construction and food production alike. Inflation won’t come down to more sustainable levels, they argue, until those supply chains have time to clear.
It’s unclear when that will happen, especially given how vulnerable the economy remains to the coronavirus pandemic and
waves, which add unpredictable pressure to the supply chain overseas and domestically. At a news conference last week, Fed Chair Jerome Powell said
“it is very difficult to predict the persistence of supply constraints or their effects on inflation. Global supply chains are complex; they will return to normal function, but the timing of that is highly uncertain.”
Some economists are also concerned that while wages are climbing, they aren’t growing enough to compensate for the rising cost of living, at least in the short
term.
Many of the items U.S. households rely on each day are seeing sharp price increases, BLS data shows. In the past 12 months, the national average price of a dozen grade A eggs rose from $1.41 to $1.82, a 29% increase. An average pound of chuck roast rose 29%, from $5.74 to $7.40. A gallon of milk rose 8.4%, from $3.38 to $3.66. However, many other items, such as cheddar and American cheese and produce like tomatoes and strawberries, got cheaper over the same period.