A good sign when economic news makes headlines, and that is certainly the case this morning: the U.S. economy grew at a slower pace than expected in November. The consumer price index in the United States, which monitors increases in prices across a basket of commodities, increased by 6.8 percent in November, according to the Labor Department. That represents the most rapid development in 39 years.
Let’s get this party started.
Prices of gasoline grew the greatest of any good, increasing by 58.1 percent over the previous year. Food prices increased by 6.1 percent on an annual basis as well.
For this reason, economists frequently exclude food and energy costs from their calculations and instead look at what is known as “core CPI” to gain a clearer picture of price increases in other sectors. It’s true that the picture there isn’t any more attractive. The core CPI increased by 4.9 percent from a year ago, marking the greatest rate of increase since 1991.
For the year, housing costs increased by 3.8 percent, the greatest rate of growth since 2007.
Used automobiles and trucks, which have been major drivers of recent inflation, had an increase of 31.4 percent in the latest month.
Inflation increased last month as a result of increases in the prices of airfares, clothing, and household furniture.
What it means for you personally
Some inflation is acceptable as long as your pay stubs increase in tandem with the rate of inflation. Workers are also getting raises: employers are allocating 3.9 percent of their total payroll for wage hikes in the coming year, the highest level in more than a decade.
However, so far throughout the pandemic, wage increases have fallen short of keeping up with inflation. And other employers aren’t willing to increase compensation by nearly 7 percent – according to CNBC, Google warned staff this week that it would not make a blanket salary change to account for inflation.
What it entails for policymakers is outlined below.
They’re dripping with perspiration. President Jerome Powell already retracted his assessment of inflation as “transitory” two weeks ago, and he will face further pressure to reduce the central bank’s stimulus measures next year, according to some analysts.
It also makes President Biden’s effort for passage of a $2 trillion social spending measure more difficult to achieve. His supporters have insisted that the package will not cause inflation to rise, but other lawmakers who are critical to the bill’s success, such as Sen. Joe Manchin, are concerned that it will do just that.
Inflation, according to Mark Zandi, chief economist at Moody’s Analytics, will gradually decline as supply chain kinks are ironed out and the Delta wave recedes, as supply chain kinks are ironed out and the Delta wave recedes.