Consumer Price Inflation Accelerates to Fastest Rate in 31 Years

By Tom Ozimek
Tom Ozimek
Tom Ozimek
Tom Ozimek has a broad background in journalism, deposit insurance, marketing and communications, and adult education. The best writing advice he's ever heard is from Roy Peter Clark: 'Hit your target' and 'leave the best for last.'
November 10, 2021 Updated: November 10, 2021

Inflation accelerated sharply and well above forecasts in October, with U.S. consumer prices rising at their fastest over-the-year pace in more than three decades as persistent supply chain bottlenecks continue to push prices skyward.

The Bureau of Labor Statistics (BLS) reported on Nov. 10 that the headline Consumer Price Index (CPI), a measure of inflation from the perspective of end consumers of goods and services, surged by 6.2 percent over the year and 0.9 percent over the month in October.

That puts the pace of over-the-year consumer price inflation at its highest level since December 1990, when it rose by 6.3 percent. At 0.9 percent, the over-the-month pace of inflation is the highest since June, which at the time was the fastest rate since 2008.

Economists polled by Bloomberg predicted the Nov. 10 CPI print would come in at 5.9 percent over the year and 0.6 percent over the month.

“No matter how squishy the definition of ‘transitory’ might be, it is undeniable that inflation is a problem,” Bankrate Chief Financial Analyst Greg McBride told The Epoch Times in an emailed statement.

While Federal Reserve policymakers have maintained that the current bout of inflation is transitory, Fed Vice Chairman Richard Clarida acknowledged on Nov. 8 that inflation this year has been “much more than a ‘moderate’ overshoot of our 2 percent longer-run inflation objective” while adding that inflation risks are weighted to the upside.

While prior months saw sharp price surges within a relatively narrow scope, price pressures have been seeping into other categories.

“Inflation is broadening out,” McBride said. “In addition to food, energy, and shelter continuing to post outsized monthly increases, new and used car prices are once again shifting into overdrive.”

Used car prices jumped 2.5 percent over the month and 26.4 percent over the year in October. New car prices rose 1.4 percent for the month and 9.8 percent for the 12 months through October.

Transportation services prices, which fell by 0.5 percent last month, jumped 0.4 percent over the month in October and 4.5 percent over the year.

The biggest contributor on a monthly and annual basis was fuel oil, which spiked 12.3 percent over the month and 59.1 percent over the year in October.

The CPI data release follows a separate government report a day prior showing that producer prices rose in the 12 months through October at 8.6 percent, matching the prior month’s rate, which was the highest since 2008.

The reading added to concerns about consumer price inflation as higher production costs tend to trickle down to consumers.

Analysts at ING said in a recent note that the extent to which elevated producer costs will ultimately get passed on to consumers depends partly on whether businesses will be willing to squeeze margins to maintain volumes.

But that becomes less likely the longer the supply chain bottlenecks persist, the ING team argued, “which means that we expect goods inflation to further increase over the coming months and to remain elevated throughout the first half of the year as pipeline pressures remain fierce.”

With prices running high and little sign of immediate relief, consumer expectations for what the rate of inflation will be in the future in the United States have risen to all-time highs.

The New York Fed’s most recent consumer inflation expectations survey showed that short-term (one year ahead) inflation expectations rose in October to 5.7 percent, the highest reading in the history of the series. The medium-term (three years ahead) inflation expectations remained unchanged from the prior month’s level of 4.2 percent, which was a record high.

Also, a key measure of the bond market’s expectations for upward price pressures over the next five years, known as the 5-year break-even inflation rate, rose to an all-time high of 2.99 percent at the end of October, before dropping slightly to 2.96 percent as of Nov. 9. This indicates investors expect inflation to average around 3 percent a year for the next five years.

“Inflation concerns are weighing on consumer confidence, and with an annual rate of north of 6 percent, this will only continue,” McBride said, also predicting that supply chain bottlenecks “will be with us well into 2022, and with that, upward pressure on prices.”

“Consumers are feeling it in the pocketbook at the gas pump, grocery store and tenants in many parts of the country could get sticker shock at their next lease renewal,” he said.

Tom Ozimek
Tom Ozimek has a broad background in journalism, deposit insurance, marketing and communications, and adult education. The best writing advice he's ever heard is from Roy Peter Clark: 'Hit your target' and 'leave the best for last.'