Inflation accelerated in October, with Americans facing sharply higher consumer prices as they head into the crucial holiday shopping season. That represents the steepest monthly rise in about 30 years.
Consumer prices increased 6.2% from the year-ago period, slightly faster than their 5.4% increase the previous month, the Bureau of Labor Statistics said Wednesday. Core inflation, which strips out volatile food and energy costs, grew 4.6% for the month.
Such swift price hikes are sending financial shocks through household budgets, following almost a decade when inflation rose between 1% to 2% annually. Americans are souring on the nation's financial outlook, with more than 6 in 10 calling the economy poor, according to polling from the Associated Press-NORC Center for Public Affairs Research.
The spike in inflation began in April, when the nation began to emerge from its pandemic lockdown and consumer demand for goods like cars, gasoline and furniture sent prices upward. At the same time, many companies are struggling with labor shortages as well as supply-chain snarls, making some products and services harder to secure.
"Grim, and more to come," noted Ian Shepherdson, chief economist at Pantheon Macroeconomics, after the latest data were released. "The underlying story here remains a combination of supply constraints, soaring labor costs, and the reopening, though the latter is now a small part."
Here are the biggest contributors to last month's inflation spike, with their October price spikes on a year-over-year basis:
In a statement on Wednesday, President Joe Biden said taming inflation "is a top priority for me." Mr. Biden pointed to the surge in energy costs as one of the top drivers of inflation, and said he was working on addressing this.
"I have directed my National Economic Council to pursue means to try to further reduce these costs, and have asked the Federal Trade Commission to strike back at any market manipulation or price gouging in this sector," Mr. Biden said. "Other price increases reflect the ongoing struggle to restore smooth operations in the economy in the restart."
Meanwhile, the Federal Reserve has stuck to its characterization of this year's higher inflation as a "transitory" issue. But economists now predict that inflation isn't likely to return to its pre-2021 levels within the next few months — and forecast that higher prices could last well into 2022.
"Ongoing supply-chain dislocations and supply/demand imbalances continue to drive inflation metrics," Rubeela Farooqi, chief U.S. economist at High Frequency Economics, said in a research note Wednesday. "Overall, 12-month changes are running well above levels Fed officials are comfortable with, and today's CPI data are not likely to lend support to the 'transient' view."
But, Farooqi added, "The expectation remains that as the health crisis continues to abate, supply chains will adjust."
Early this year, one of the top drivers of inflation were used and new cars — items that people typically don't purchase frequently. But prices are now rising for items that are purchased daily by most consumers, such as gas to fill up their cars and steak at the grocery store.
On top of that, rent prices accelerated in October, adding to the financial pinch felt by some consumers. All of these issues could prompt the Fed to boost interest rates earlier than expected in an attempt to tamp consumer demand and tame inflation, economists noted.
"Strong demand and constrained supply will drive inflation higher in early 2022 which could lead the Fed to raise rates earlier than our December 2022 forecast," noted Kathy Bostjancic, chief U.S. financial economist at Oxford Economics, in a report issued after the inflation numbers were released.