Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Surging gasoline, food prices fan U.S. inflation; labor market tightening

Economic IndicatorsNov 10, 2021 01:42PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. FILE PHOTO: Shoppers browse in a supermarket while wearing masks to help slow the spread of coronavirus disease (COVID-19) in north St. Louis, Missouri, U.S. April 4, 2020. REUTERS/Lawrence Bryant/File Photo

By Lucia Mutikani

WASHINGTON (Reuters) - U.S. consumer prices accelerated in October as Americans paid more for gasoline and food, leading to the biggest annual gain in 31 years, more signs that inflation could stay uncomfortably high well into 2022 amid snarled global supply chains.

Inflation pressures are also brewing in the labor market, where an acute shortage of workers is driving wages higher. The number of Americans filing claims for unemployment benefits fell to a 20-month low last week, other data showed on Wednesday.

But high inflation is eroding the wage gains, adding to political risk for President Joe Biden, whose approval rating has been falling as Americans grow more anxious about the economy. Broadening inflationary pressures could also complicate the Federal Reserve's communication. The Fed last week restated that high inflation is "expected to be transitory."

Both the White House and the Fed have maintained that prices will fall once supply bottlenecks start easing.

"Risks are clearly shifting toward U.S. inflation remaining elevated longer than previously thought, but that doesn't mean that it's permanent," said Ryan Sweet, a senior economist at Moody's (NYSE:MCO) Analytics in West Chester, Pennsylvania. "The Fed could face a situation where higher consumer prices begin to weigh on consumer spending, reducing GDP growth."

The consumer price index jumped 0.9% last month after climbing 0.4% in September, the Labor Department said. The largest gain in four months hoisted the annual increase in the CPI to 6.2%. That was the biggest year-on-year rise since November 1990 and followed a 5.4% advance in September.

Economists polled by Reuters had forecast the CPI shooting up 0.6%. The broad-based increase in prices last month was led by gasoline prices, which surged 6.1% after rising 1.2% in September. Brent crude oil has gained over 60% this year as a recovering global economy is heating up demand.

Food prices advanced 0.9%, mostly driven by meat, eggs, fish, vegetables, cereals and bakery products. It also cost more to eat away from home. But prices for alcoholic beverages fell.

The government reported on Tuesday that producer prices increased strongly in October, reversing a slowing trend in the monthly PPI that had become entrenched since spring.

Inflation is heating up again as the economic drag from the summer wave of COVID-19 infections, driven by the Delta variant, fades and supply bottlenecks persist. Trillions of dollars in pandemic relief from governments across the globe fueled demand for goods, leaving supply chains overstretched.

The nearly two-year long pandemic has upended labor markets, causing a global shortage of workers needed to produce raw materials and move goods from factories to consumers.

Biden in a statement blamed the inflation surge on energy prices and said he had directed the White House 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."

Stocks on Wall Street fell. The dollar gained versus a basket of currencies. U.S. Treasury yields rose.

BROAD-BASED INCREASE

Excluding the volatile food and energy components, the CPI gained 0.6% last month after climbing 0.2% in September. The so-called core CPI was boosted by rents, with owners' equivalent rent of primary residence, which is what a homeowner would receive from renting a home, rising a solid 0.4%.

The cost of hotel and motel accommodation rose 1.5%. Prices for used cars and trucks rebounded 2.5% after declining for two straight months. New motor vehicle prices increased 1.4%, marking the seventh consecutive month of gains. A global semiconductor shortage has undercut motor vehicle production.

Healthcare costs increased 0.5%, the largest gain in 17 months. Consumers also paid more for household furnishings, recreation and grooming. The costs of motor vehicle insurance and apparel were unchanged. Air fares fell 0.7%.

The so-called core CPI jumped 4.6% on a year-on-year basis, the largest increase since August 1991, after being steady at 4.0% for two straight months.

The Fed's preferred inflation measure for its flexible 2% target increased 3.6% year-on-year in September. The U.S. central bank this month started reducing the amount of money it is injecting into the economy through monthly bond purchases.

Economists expect the Fed to start raising interest rates in late 2022.

"The heat seen in rents and across services could make the Fed begin to sweat as they wait out the return in the labor supply and easing of supply constraints over the coming months," said Alexander Lin, a U.S. economist at Bank of America (NYSE:BAC) Securities in New York. "Clearly the risks are for the timing of rate hikes to be pulled forward."

In another report on Wednesday, the Labor Department said initial claims for state unemployment benefits fell 4,000 to a seasonally adjusted 267,000 for the week ended Nov. 6.

That was the lowest level since the middle of March in 2020, when the economy almost ground to a halt under the onslaught of mandatory business closures aimed at slowing the first wave of COVID-19 infections.

Claims, which have now dropped for six straight weeks, are within striking distance of their pre-pandemic level.

The government reported last Friday that the economy added 531,000 jobs in October, with annual wage growth the largest in eight months. The labor force is down 3 million from its pre-pandemic level, making it harder to fill the 10.4 million job openings as of the of August.

Wages are, however, lagging inflation, eroding households' purchasing power. A third report from the Labor Department showed average weekly earnings adjusted for inflation fell 0.9% in October and were down 1.6% year-on-year.

Supply constraints and high inflation helped to restrict economic growth to its slowest pace in more than a year in the third quarter.

Surging gasoline, food prices fan U.S. inflation; labor market tightening
 

Related Articles

Car sales dampened by chip shortage, COVID measures
Car sales dampened by chip shortage, COVID measures By Reuters - May 26, 2022

SHANGHAI/BERLIN (Reuters) -Car sales in China, Europe and the United States remain depressed compared to last year's levels as semiconductor shortages and anti-pandemic measures...

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (17)
Ac Tektrader
Ac Tektrader Nov 10, 2021 5:07PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
what are critics going to do when these bottle necks get resolved and go away with inventories exploding....which could start to happen in the late second quarter or third quarter of 2022...
Casador Del Oso
Casador Del Oso Nov 10, 2021 12:32PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Inflation reality, not inflation fears. Look out below, Joe.
Ricardo Diogo
Rcd72 Nov 10, 2021 12:25PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
FED 120 B month purchases is to blame for this nonsense
Mark Stallone
Mark Stallone Nov 10, 2021 11:38AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
RELAX. It's all part of Building Back "Better". Joey and Kam Kam got this.
Eloy Rodrigo
Eloy Rodrigo Nov 10, 2021 11:25AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
What drives inflation is money printing.
Nov 10, 2021 11:19AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
*you*are*huge
Nov 10, 2021 11:18AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
I didnt blame Brandon or other PresidentWhile tou ate correct about inflationary pressures with the money supply, the unemployment numbers and FORCED mandate that is causing further job losses have a huhe impact too
John Walker
BURT Nov 10, 2021 10:57AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
You all playing the political blame game are insufferable. If Trump was president, he would be taking credit for market all time highs. The Fed has abandoned their two mandates and as a result inflation is way higher than interest rate. There is way too much liquidity and the only place to put it is in assets driving everything up.
Ac Tektrader
Ac Tektrader Nov 10, 2021 10:57AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Daryl Allen ..you odviously haven't been paying attention,. trump would and while president demanded the fed keep rates at close to zero. he's the one that signed the Congressional bills that keep the federal money coming to the unemployed. this inflation is not because of the unimployed having money to.spend. it's because people ARE employed and have more money to spend; there is not enough supply to met demand.
Javier Escamilla
Javier Escamilla Nov 10, 2021 10:53AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Vegan is the new way!
John Klan
John Klan Nov 10, 2021 10:47AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Watch...SHADOW GOVERNMENT....on Amazon prime. Pretty scary stuff.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email