US inflation at 8.5%, highest since 1981

Tuesday, April 12, 2022
author picture Lucas Simon
Video/image source : youtube, funancial
Original content created by staff

US Inflation at All-Time High in March

US inflation reached an all-time high last month as gas prices increased 18.3% and food prices rose 1%. Home prices also increased 0.3%. But some analysts think that the high levels are the new normal. Inflation is still a way off from the 1981 peak‚ but some analysts believe that the latest increase was merely a top of the cycle. For more information‚ read the article below. Inflation is rising despite the current economic crisis.

Gas prices rose 18.3% in March

According to the Consumer Price Index (CPI) released by the U.S. Bureau of Labor‚ inflation rose 8.5% in March‚ the highest rate since February 1981. Gas prices were responsible for a whopping 18.3% increase in March‚ accounting for more than half of the overall monthly rise. Other items such as food and shelter rose less than 1%‚ while the energy index rose 8.8%. While the overall CPI increase is down from February‚ the rate for gasoline remained the highest since May 1981. The rise in gas prices reflects the impact of the Russian invasion of Ukraine‚ which prompted economic sanctions and restrictions on Russian energy imports. The US and European Union have stepped up pressure on Moscow by banning Russian gas imports. Russian gas supplies provide a major source of revenue for the Kremlin‚ and their price rise reflects this. The broader impact of the Russian-Ukrainian conflict is also reflected in rising costs. Consumer sentiment has been hit hard by the rising cost of living‚ and the consumer confidence index of the University of Michigan fell to an 11-year low in early March. Energy costs are the primary driver of inflation in the United States. The cost of gasoline accounted for nearly half of the increase in consumer prices in March and are up 32% from last year. The Biden administration has released millions of barrels from the Strategic Petroleum Reserve to bring prices down. But‚ the spike in gas prices is not sustainable and the country may have reached its price ceiling soon. Although it is unlikely‚ the U.S. Department of Labor's data suggest that we are approaching the peak of inflation. Despite the higher overall cost of energy‚ there was no increase in the cost of used cars‚ while the price of used cars fell. This has added a layer of complexity to the political equation for President Joe Biden‚ as voters prioritize gasoline and rank it above other issues such as the war in Ukraine‚ COVID-19‚ and food and shelter. However‚ these factors do not reflect the underlying health of the American people. Despite the drop in gas prices‚ the national average per gallon was still above $4 on Tuesday‚ just a few cents shy of the previous record. The increase in energy prices has also pushed the cost of groceries and other items up. The price of food and shelter rose just 0.5% in March‚ but is still up almost 15% over the past year. And‚ of course‚ the cost of buying a new car is also going up. The cost of energy is still one of the most expensive components of consumer spending. While it is important to remember that the cost of gas is not the only factor driving the cost of living‚ the war in Ukraine has made things even worse. With gas prices increasing so quickly‚ it is no wonder that the price of a used car is starting to moderate. But‚ while used car prices are still rising‚ the rate of inflation is stabilizing.

Food prices rose 1% in March

According to the U.S. Bureau of Labor Statistics‚ food prices rose 1% in March. The increase was the largest 12-month increase since March 1981. The increase was due to increased prices for food purchased and consumed away from home. The price increases also extended to food purchased at restaurants. In March‚ the overall food index increased by 1.2%. But the jump is capped by the fact that prices were down 0.7% in February. The food index‚ which includes groceries‚ is one of the main contributors to inflation in March. Fresh produce‚ for example‚ rose 1.5% in March after increasing 2.3% in February. Since last year‚ food prices have increased by an annual average of 10%. Meats‚ poultry‚ fish‚ and eggs increased by 13.7%‚ while the index for other grocery store food groups jumped between seven and ten percent. Food prices are likely to remain high this year‚ as the U.S. economy is resuming normalcy. The FAO says that food prices will increase by another 2% in the next 12 months. The increase is the biggest since 1990. Sugar and dairy products are particularly high. These two items are used by more people each year than any other. As a result‚ the price of dairy and fresh produce has increased significantly. It's important to understand the reasons behind the food price increase. It may be surprising to learn that food prices are rising so quickly. Rising inflation is already hurting American households. After the Democrats poured $2 trillion into the economy‚ the cost of groceries has continued to increase. While March's price spike wasn't nearly as large as that in March‚ it's still hurting millions of families. Despite the smaller increase in food prices‚ the overall consumer price index rose 0.6 percent last month‚ the largest gain since August 2012. Despite the soaring cost of gas‚ the CPI's increase in March was still lower than last month. However‚ energy prices rose by a record 32% over the past year and 1% month-over-month. That increase in the CPI was largely driven by higher energy costs‚ including gas and fuel oil. Despite the increase in energy costs‚ gas prices remain near four-dollar a gallon for the first time in five weeks. According to the latest USDA outlook‚ food prices will rise a further 4% by 2022. This will be the highest rate of food inflation in 40 years. However‚ food prices will begin to decline again in 2022 and beyond‚ according to Trading Economics. Nonetheless‚ the U.S. Department of Agriculture has warned that the food price increases will continue to impact grocery and restaurant prices for the foreseeable future. So‚ we will continue to see increases in food prices for the next several years‚ as we all try to eat healthier.

Home prices rose 0.3%

The March data for US inflation showed price increases not seen since the stagflation days. Both headline and core inflation rose in March‚ and the average consumer price index was up 6% from a year ago. But while prices have increased‚ wages are not keeping up with rising costs. Real average hourly earnings fell 0.8% in March‚ which could add to inflation pressures. Here are some things to keep in mind. The rate of inflation in the United States reached its highest level in almost four decades last year. The increase in the Consumer Price Index (CPI) is due to a combination of supply and demand imbalances and stimulus aimed at securing the economy. The 7% increase in December compared to a year ago is the highest annual inflation rate in over four decades. And the rate of inflation is higher than in January. The increase in prices is being blamed on high energy costs and the ongoing war in Ukraine. Rising housing prices have a direct impact on the wealth of households and the affordability of neighborhoods‚ and play a significant role in overall inflation. The CPI‚ which measures the prices of a basket of household goods‚ includes housing prices‚ and it weights items based on their average share of total expenditures. The CPI includes a shelter component based on rent‚ owner-occupied housing‚ and lodging. Shelter makes up nearly a third of the basket in CPI inflation‚ and about 40% of the basket in the core CPI (which excludes volatile food and energy components). The higher prices are causing the most trouble for low-income households. According to the latest Gallup poll‚ four-fifths of U.S. adults with incomes less than $40000 report hardship due to higher prices. Despite this‚ one-fifth of upper-income Americans report moderate or severe hardship. Moreover‚ the percentage of Americans who report experiencing severe hardship in the wake of rising prices is higher than in the past. Home values are at risk of further acceleration. Recent home price appreciation has increased the housing component of the CPI‚ but it is still well below the pre-pandemic trend. Moreover‚ renormalization of the housing component would require a temporary acceleration above the pre-pandemic pace‚ which would add thirteen basis points to core CPI inflation each month. In other words‚ the pandemic-related market disruptions have caused unprecedented home prices to rise. The consumer price index is widely used to measure the rising cost of living. Last month‚ it rose by more than eight percent‚ the highest since December 1981. Besides gasoline‚ other major increases in the index include health care costs‚ grocery costs‚ rent‚ and airfare fares. The March increase is the biggest since 2005‚ and almost half of it came from rising prices of gas. These costs were also the highest in March since 1981.