U.S. inflation hit a three-decade high in October, delivering widespread and sizable price increases to households for everything from groceries to cars due to persistent supply shortages and strong consumer demand.
The Labor Department said the consumer-price index—which measures what consumers pay for goods and services—increased in October by 6.2% from a year ago. That was the fastest 12-month pace since 1990 and the fifth straight month of inflation above 5%.
The core price index, which excludes the often-volatile categories of food and energy, climbed 4.6% in October from a year earlier, higher than September’s 4% rise and the largest increase since 1991.
Price increases were broad-based, with higher costs for new and used autos, gasoline and other energy costs, furniture, rent and medical care, the Labor Department said. Food prices for both groceries and dining out rose by the most in decades. Prices fell for airline fares and alcohol.
U.S. stocks fell and bond yields rose as investors digested the impact of price pressure on the global economy.
Persistently higher inflation—triggered by a faster-than-anticipated but uneven economic recovery, trillions of dollars in pandemic-related government stimulus and other factors—is hitting consumers’ wallets. At the same time, a rebounding economy and healthy household balance sheets are both stoking demand and cushioning price increases.
The inflation surge is complicating the Federal Reserve’s strategy for unwinding easy-money policies the central bank imposed early in the pandemic. It has also emerged as a political factor affecting the Biden administration’s economic agenda.
The reading renewed GOP criticism of Democrats’ roughly $2 trillion social spending and climate plan as wasteful and likely to fuel inflation. The plan includes funding for expanded child care, free prekindergarten, an enhanced child tax credit and other items, along with provisions to bring down prescription drug prices.
Prices climbed the fastest in the South, a part of the country that reopened earlier in the pandemic but was hit relatively harder by the Delta variant of Covid-19. Prices were also up more in the Midwest than in the Northeast and West.
Laura Rosner-Warburton, senior economist at MacroPolicy Perspectives, expects inflation to persist for a while, with the U.S. entering a six-month period of unusually high price increases.
“I do think we’re moving into a new phase where inflation is broader and where things are going to get a little more intense,” she said. “Part of that reflects that [supply-chain] bottlenecks aren’t resolved going into the holiday season, when a lot of purchases get made, and that the economy is doing really well, so you have strong demand.”
Ms. Rosner-Warburton sees a shift under way in which a wider range of factors will spur inflation, as opposed to previous months’ increases that were driven disproportionately by skyrocketing vehicle prices and the reopening of services after Covid-19 vaccines became available.
Washington, D.C., resident Jordan Berry said she has been feeling the squeeze of higher prices. The 21-year-old is taking a year off from college and spending that time as a babysitter, tutor and personal cook. She says she has been hit by higher grocery prices and Uber rides to and from clients.
“I literally went to Whole Foods and Trader Joe’s recently and we spent probably the same amount of money and got a lot less things” compared with grocery trips earlier this year, she said.
The other day, Ms. Berry tried to book an Uber to a babysitting job 4 miles from her home and cringed at the proposed $30 fare. She waited 15 minutes until the fare came down. “Uber prices have been draining my pocket,” she said.
Recently, Ms. Berry added, someone hired her to cook two meals and the ingredients cost $100—leading her to charge her client more.
Fed officials are watching inflation measures closely to gauge whether the recent jump in prices will be temporary or longer lasting. One such factor is consumer expectations of future inflation, which can prove self-fulfilling as households are more likely to demand higher wages and accept higher prices in anticipation of further price hikes.