Record High US Inflation

January 13, 2022

On January 12, 2022, the Labour Department in United States (US) reported that consumer prices increased to 7% in December 2021 as compared to 12 months earlier, that is December 2020.

Highlights

The jump in the consumer prices was hottest year-over-year inflation since June 1982.
The core inflation also increased to 5.5% in past year, in fastest pace since 1991. It excluded the volatile energy and food prices.
Bacon prices have increased to 19%, as compared to year 2020.
Men’s coats and suits prices have increased by 11%, living & dining room furniture by 17%, while renting a car by 36%, as compared to December 2020.

What are the causes of spike in inflation?

Major surge is a result of healthy economic trends.
Amid the pandemic in 2020, the economy was paralyzed and lockdowns were imposed. Businesses were closed or cut hours. Consumers were inside home as a health precaution while employers slashed 22 million jobs.
As a result, economic output reached to 31% annual rate in April-June quarters. Companies cut the investment and Restocking was postponed. Thus, economy moved towards recession.

When it will last?

Increased consumer price inflation is likely to endure as long as companies struggle to meet the consumers’ demand.

How is it affecting consumers?

Though, strong job market is increasing wages, but is not enough to compensate for higher prices. As per Labor Department, hourly earnings for all private-sector employees had decreased to 1.7% in November 2021. But as an exception, after-inflation wages increased by 14% for hotel workers and 7% for restaurant employees.

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