US inflation levels are hotter than ever before. Consumer prices rose by 5.7% in November compared to the same period last year. This is the highest pace in nearly four decades.
US Inflation Rates Are Highest In Nearly 40 Years
The inflation rate is running at its hottest pace in nearly four decades. Supply chain disruptions, high consumer demand, and worker shortages all combine to raise the prices of goods and services.
According to the Personal Consumption Expenditures price index, consumer prices rose by 5.7% in November. This erased the previous record of 5.1% set last month. It’s now 0.3% behind February 1982’s record of 6.2%.
Price Increases Outpace US Inflation Targets
The series of price increases so far is running circles around the government’s inflation target of 2%. The Federal Reserve earlier set the 2% projection, anticipating that the inflation will remain transitory as the supply chain works itself out.
However, the reverse proved true. Food and energy prices spiked by 4.7% in November versus last year. This is also the highest rate of increase since 1982.
Meanwhile, consumer spending rose by 0.6% in November. While it represents a modest gain, it pales in comparison to the 1.4% surge in October. Consumer spending accounts for 70% of total US economic activity.
Increasing Energy Costs Led US Inflation Spike
Increasing energy costs account for the bulk of the US inflation rise. Energy costs rose by 34% compared to 2020 rates. At the same time, food costs rose 5.6% over the same period.
Meanwhile, services inflation rose by 4.3 % while goods inflation went up 8.5% in November. The numbers outpaced the 7.6% rate a month before.
Kathy Bostjancic, the chief US financial economist at Oxford Economics, noticed a trend. She thinks that US consumers spread their shopping tasks over the months instead of just November.
“Consumers spent with less enthusiasm in November as they shifted their holiday shopping to earlier in the season,” she said. Then, they “ continued to contend with escalating prices and reduced product availability.”
US Households Saved Less As Well
The Commerce Department, which released the report, also shared US household spending data for the month. Americans also saved less for November.
Inflation accounted for the fact that many families didn’t change their spending budget. Flat consumer spending means a decrease in demand. This in turn leads to lower US inflation.
Republican lawmakers are using rising levels of US inflation as proof that the economy is having trouble. High prices mean that President Joe Biden’s economic policies are far from effective.
In fact, Biden’s policies are hurting Americans more as incomes can’t keep up with rising costs.
Don’t Blame Us, Blame The Manufacturers
However, the Biden administration refused to take the blame. It said that the country’s rapid reopening helped make prices spike. Suppliers couldn’t keep up with demand. This led to higher prices and congested supply chains.
Meanwhile, the Federal Reserve is trying to make for lost time in not acknowledging high US inflation levels earlier.
The agency said it will accelerate its pace to fight inflation. In particular, the US central bank plans to raise interest rates at least thrice to slow unchecked growth.
Watch the Yahoo Finance video reporting that US inflation jumps 6.8% in November, the fastest rate in 39 years:
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