USA November, inflation rose 6.8%, much higher than expected, and reached its highest level since 1982

The Labor Department said Friday that inflation accelerated at its fastest pace since 1982, putting pressure on economic recovery and raising interest rates by the Fed. The Consumer Price Index, which measures the value of a diverse basket of goods and services, rose 0.8% month-over-month or 6.8% year-over-year, the fastest since June 1982.  Core CPI, excluding food and energy, rose 0.5% MoM and 4.9% YoY, the largest increase since mid-1991. The Dow Jones estimate was for a 6.7% annual gain for headline CPI and 4.9% for core.

Rice price hikes come from familiar culprits. Energy prices have increased 33.3% since November 2020, including a 3.5% increase in November. Gasoline alone increased 58.1%.  Food prices rose 6.1% on the year, while prices of used cars and trucks, a major contributor to inflation, rose 31.4%, after rising 2.5% last month.

The Labor Department said the increase in food and energy ingredients was the fastest 12-month gain in at least 13 years.  Housing costs, which account for about a third of the CPI, rose 3.8% on the year, the highest level since 2007 as the housing crisis intensified.  Markets reacted positively to the report, with Wall Street stock market indexes rising, while government bond yields fell. Some economists think Friday’s report could point to an even higher 7% inflation for the headline figure. 4,444 Fed officials attributed the rise in inflation to pandemic-related factors. Strong consumer demand for commodities and supply chain bottlenecks were key factors, although the price hikes were stronger and more persistent than policymakers anticipated.

“There is no doubt that no matter how you look at it, even if you remove the extremes caused by the pandemic, inflation is still very high,” said Randy Frederick, Managing Director Trading and Derivatives at Charles Schwab said. “It’s always been supply chain disruption, semiconductor inflation.”  Central bank officials have indicated that they will begin to reduce the aid they are providing to try to contain inflation. Many investors expect the Fed to double its asset-buying reductions to $30 billion a month, possibly from January. This would allow the Fed to start raising rates as early as next spring.

Inflationary pressures have a heavy impact on employees. Although gross wages rose 4.8% last year, average real hourly wages taking into account inflation fell another 0.4% in November and  1.9% over a 12-year period. Month, the Labor Department said in a separate statement.

While much of pandemic inflation is due to increasing demand for products such as vehicles and other durable goods, service inflation has also increased. Excluding energy, utility costs rose 0.4 percent in November and 3.4 percent in 12 months, the fastest annual rate in April 2007, ahead of the holiday shopping season.  Some economists, however, think that inflation is nearing a peak, especially as energy prices have fallen in recent weeks. While West Texas Intermediate is up more than 52% in 2021, prices are down about 14% from their most recent peak in November, President Joe Biden has paid a political price for the price hike: A recent CNBC survey found his approval rating at just 41%, largely because 56% of respondents disapproved of his economic record, compared with just 37% of those who approved.