U.S. Inflation Rate at 7.5% Hits 40-Year High

U.S. inflation tapped in hotter than economists expected for January as Americans paid more for a broad range of goods and services, according to a government report released Thursday, Feb. 10.

Higher consumer prices last month pushed up the annual inflation rate to the highest level in four decades. Increases in food and shelter prices stood out, as did prices for energy.

In the headline monthly figure, U.S. consumer prices climbed 0.6% in January after a similar increase in December, the Labor Department said in its monthly report on the Consumer Price Index (CPI). The CPI is a broad measure of what Americans pay for everyday items ranging from groceries to gas. The figure compares to reported estimates for a 0.4% to 0.5% increase.

In several key consumer pricing categories:

  • Prices at the pump fell 0.8% in January, following a revised increase of 1.3% in December. Gas prices soared 40% from a year earlier.

  • The broader index for energy, which combines items like gasoline, electricity, and fuel oil, read in at 0.9% for a second time. Energy prices surged 27% in the past 12 months.

  • Overall food prices for the month rose 0.9% from 0.5%. Food prices rose 7% year-on-year, with the cost of groceries up 7.4% and the price of eating out 6.4% higher.

Excluding the more volatile food and energy components, core consumer prices also rose 0.6% in January to match their increase in December, and also against an expected increase of around 0.4% from economists.

"This was the seventh time in the last 10 months it has increased at least 0.5 percent. Along with the index for shelter, the indexes for household furnishings and operations, used cars and trucks, medical care, and apparel were among many indexes that increased over the month," the Labor Department’s monthly report said.

As recently as June, and before in April, the core index at 0.9% was the highest for a month since April 1982.

Shelter or housing costs went up 0.3% in January compared to 0.4% in December, and they rose 4.4% from a year earlier. Components of shelter include pricing items like rent for apartments, rental equivalence, lodging away from home such as hotels and motels, and housing at schools. The index accounts for about one-third of the entire CPI.

Used car and truck prices eased to 1.5% from 3.3% and soared 40.5% over the past 12 months.

Clothing prices rose 1.1% for a second month in a row and jumped 5.3% from a year earlier.

New vehicle prices were flat on the month, snapping a streak of nine monthly increases. They had registered a second straight 1.2% increase in December. Prices shot up 12.2 from a year ago.

In the headline annual figure, inflation surged 7.5% year-over-year, posting the highest 12-month inflation rate since February 1982 and after jumping 7% previously. Commonly reported forecasts were for a 7.2% to 7.3% increase.

Core inflation ran 6% quicker over the past year, registering as the largest increase since the annual period ending August 1982 and compares to 5.5% previously. The core, "all items less food and energy" index is one of the benchmark inflation rates monitored by the Federal Open Market Committee (FOMC) as it helps the central bank decide where to set its key interest rate.

"January’s upside CPI surprise adds strongly to the case for a 50-basis point hike at the March FOMC meeting. The increase was broad-based, with energy, food prices and rents keeping prices elevated, and with some alarming increases in categories not seen before such as medical services — which has a much larger weight in the PCE deflator, the Fed’s preferred price gauge," Bloomberg News quoted economists Anna Wong and Andrew Husby.

"While this report, on its own, might not trigger a 50 basis points inaugural rate hike from the Fed, the pressure will continue to mount if inflation doesn’t begin to rollover this spring as policymakers anticipate," Reuters quoted Sal Guatieri, a senior economist at BMO Capital Markets in Toronto.

The following table of key inflation figures is for the last seven months through January, as published by the U.S. Labor Department’s Bureau of Labor Statistics (www.bls.gov/cpi) on Feb. 10, 2022. To index the data each month, the BLS monitors the prices of about 80,000 consumer goods and services from around the nation. All monthly and annual pricing changes are in percentages.

July 2021 to January 2022 Consumer Prices – Gains & Losses in Percent
(Seasonally Adjusted)

  July 2021 August 2021 September 2021 October 2021 November 2021 December 2021 January 2022 12 Month
All items 0.5 0.3 0.4 0.9 0.7 0.6 0.6 7.5
  Food 0.7 0.4 0.9 0.9 0.8 0.5 0.9 7.0
    Food at home 0.6 0.4 1.2 0.9 0.9 0.4 1.0 7.4
    Food away from home 0.8 0.4 0.5 0.8 0.6 0.6 0.7 6.4
  Energy 1.6 1.9 1.2 3.7 2.4 0.9 0.9 27.0
    Energy commodities 2.4 2.5 1.2 4.7 4.2 1.3 -0.6 39.9
      Gasoline (all types) 2.5 2.5 1.1 4.6 4.5 1.3 -0.8 40.0
      Fuel oil 0.6 -2.1 3.9 12.3 3.5 -2.4 9.5 46.5
    Energy services 0.7 1.2 1.2 2.4 0.2 0.3 2.9 13.6
      Electricity 0.2 1.0 0.6 1.4 0.2 0.5 4.2 10.7
      Utility (piped) gas service 2.2 1.6 2.9 5.9 0.3 -0.3 -0.5 23.9
  All items less food, energy 0.3 0.2 0.3 0.6 0.5 0.6 0.6 6.0
    Commodities less food, energy 0.4 0.4 0.3 1.1 0.9 1.2 1.0 11.7
      New vehicles 1.5 1.2 1.3 1.3 1.2 1.2 .0 12.2
      Used cars and trucks .0 -1.2 -0.5 2.5 2.4 3.3 1.5 40.5
      Apparel 0.1 0.3 -0.7 0.6 0.7 1.1 1.1 5.3
      Medical care 0.2 -0.2 0.3 0.6 0.1 .0 0.9 1.4
    Services less energy 0.3 0.1 0.2 0.4 0.4 0.3 0.4 1.4
      Shelter 0.4 0.2 0.4 0.5 0.5 0.4 0.3 4.4
      Transportation -0.9 -1.2 -1.0 0.2 0.7 .0 1.0 5.6
      Medical care 0.2 0.2 0.2 0.4 0.3 0.3 0.6 2.7

 

The BLS releases inflation data around the middle of a month for consumer prices surveyed up to the previous month. The Consumer Price Index (CPI) for February and the latest annual period become public on March 10, 2022.

CPI data is used in calculating inflation rates and in this site’s U.S. Inflation Calculator. The US Inflation Calculator shows cumulative inflation and the change in buying power of the U.S. dollar over time.

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