US consumer prices surge 6.8% in November, biggest jump since 1982

WASHINGTON (BLOOMBERG, REUTERS) – US consumer prices rose last month at the fastest annual pace in nearly 40 years, magnifying how rapid and persistent inflation is eroding pay cheques and increasing pressure on the Federal Reserve to tighten policy.

The consumer price index (CPI) increased 6.8 per cent from November 2020, according to Labour Department data released on Friday (Dec 10), the fastest pace since 1982.

The widely followed inflation gauge rose 0.8 per cent from October, exceeding forecasts and extending a trend of sizeable increases that began earlier this year.

The median forecasts in a Bloomberg survey of economists called for a 6.8 per cent annual gain and a 0.7 per cent advance in the monthly measure. The yield on 10-year Treasuries slid, while S&P 500 index futures gained and the dollar fell.

The increase in the CPI reflected broad advances in most categories. Petrol, shelter, food and vehicles were among the larger contributors to the month-over-month increase.

The data reinforces expectations that the Fed will accelerate the wind-down of its bond-buying programme at the central bank’s final meeting of the year next week.

Rising inflation looms large around the world as economies bounce back from the troughs of the Covid-19 pandemic and the supply chain crunch wears on.

In Singapore, overall inflation hit an eight-year high in October at 3.2 per cent year on year. Core inflation, which excludes rents and private road transport costs, climbed to 1.5 per cent – the highest in nearly three years.

In the United States, a faster tapering of bond purchases would open the door for the Fed to begin increasing interest rates, a move markets now expect by the middle of next year. Annual CPI increases are anticipated to hover near 7 per cent into 2022.

Shelter costs – which  make up about a third of the overall index – rose 0.5 per cent in November from a month earlier. Compared with the same month last year, the 3.8 per cent gain was the biggest since 2007. Housing costs are anticipated to drift higher next year as surging rents and home prices feed into the measure.

Other data this week showed that there were 11 million job openings at the end of October and that Americans quit jobs at near-record rates.

The tight labour market is boosting wages, and supply bottlenecks are showing little sign of easing, indicating that high inflation could persist well into 2022.

“With supply shortages likely to stick around until next year and service-sector prices trending higher, inflation is going to get worse before it gets better,” said Wells Fargo senior economist Sam Bullard.

Fed chairman Jerome Powell has said the US central bank should consider speeding up the winding-down of its massive bond purchases at its policy meeting next Tuesday and Wednesday.

Excluding the volatile food and energy components, so-called core prices rose 0.5 per cent from the prior month. The core CPI was up 4.9 per cent from a year earlier, a fresh 30-year high.

The Fed tracks the personal consumption expenditures (PCE) price index, excluding the volatile food and energy components, for its flexible 2 per cent target.

The core PCE price index surged 4.1 per cent in the 12 months through October, the most since January 1991. November data will be released later this month.

“A continued trend higher in core inflation creates further hawkish risks for a Fed that has recently become more focused on the inflation side of its mandate, and suggests a rising likelihood of an even earlier first rate hike,” said Citigroup economist Veronica Clark.

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