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Consumer Price Inflation Growth Fastest in Four Decades

Jonathan loves talking politics, economics and philosophy. He carries unique perspectives on everything making him a rather odd mix of liberal-conservative with a streak of independent Austrian thought.
Published: December 12, 2021
The U.S. has been experiencing its highest rates of inflation in decades, with differing opinions about its major drivers.
The U.S. has been experiencing its highest rates of inflation in decades, with differing opinions about its major drivers. (Image: PhotoMIX-Company via Pixabay)

The U.S. Labor Department recently released inflation statistics for last month, painting a grim picture of the economy. The Consumer Price Index (CPI), which measures how much customers pay for goods and services, jumped by 6.8 percent in November compared to a year ago. This is the sixth straight month inflation has grown by more than 5 percent and is also the fastest 12-month inflation spike since 1982.

According to Dow Jones, analysts had expected a slightly slower year-over-year inflation growth rate of 6.7 percent. Compared to October of this year, the CPI rose by 0.8 percent. Core CPI, which excludes items like energy and food, rose by 4.9 percent year-over-year, compared to 4.6 percent in October. November’s core CPI was 0.5 percent higher than the previous month.

Items that contributed the most to the inflation spike were food, shelter, used cars, new vehicles, trucks, and gasoline. The gasoline index is up by 6.1 percent month-over-month, while the energy index has risen by 3.5 percent. In the previous 12 months, food prices have risen by 6.1 percent, while energy prices surged by 33.3 percent.

“Further evidence of inflation broadening out, household furnishings, apparel, and the usual suspects of new and used vehicle prices all posted outsized increases in November… Inflation is outpacing increases in household income and weighing heavily on consumer confidence, which is at a decade low. It is only a matter of time before it impacts consumer spending in a material way,” Bankrate Chief Financial Analyst Greg McBride told The Epoch Times in an emailed statement.

President Joe Biden dismissed the severity of the rising inflation, calling it a “bump” in the road. He insisted that his multi-trillion dollar government spending initiative has no role in spiking prices. Instead, Biden blamed the supply chain crisis.

“It’s a real bump in the road, it does affect families… When you walk in the grocery store and you’re paying more for whatever you’re purchasing. It matters. It matters to people… I think you’ll see it change sooner, quicker, and more rapidly than most people think,” Biden said.

According to Jason Furman, an economic adviser in the Obama White House, the massive spending undertaken by the Biden administration, including handing out 1,400 dollars in checks to households, has overstimulated the economy and caused a rise in prices.

Blaming Washington for “systematically” underestimating inflation, Furman believes the Biden administration “poured kerosene on the fire.” Furman also does not agree with Biden’s assertion that inflation is due to the supply chain crisis. 

He pointed out that Europe is going through the same supply chain issues, but has lower inflation rates than the United States because “they didn’t do nearly as much stimulus.”

In an interview with The Epoch Times, Chris Zaccarelli, Chief Investment Officer for Independent Advisor Alliance, called the November CPI numbers “shocking.” He believes the Fed will be forced to “increase the pace of their tapering plans,” which potentially involves cutting down their buying activity “twice as quickly.”

The Fed might hike up interest rates or look at selling bonds in a bid to counter inflation. George Ball, chairman of Sanders Morris Harris, a financial services firm, was not surprised by the high inflation numbers.

“Friday’s elevated inflation reading means that overweighting a portfolio to technology stocks will be an increasingly bad idea, as the Federal Reserve may be forced to tighten policy faster-than-expected to offset inflation and a higher interest rate environment tends to make tech stocks less attractive,” Ball said.