Inflation Hit 39-Year High in November as Prices Increased by 6.8%

What’s the story?

• The Bureau of Labor Statistics (BLS) reported Friday that the all items consumer price index rose by 6.8% over the last 12 months through November, which is the highest rate recorded since a comparable period ending in June 1982 and more than three times the Federal Reserve’s target rate of 2%.
• Month-to-month consumer prices rose by 0.8% in November on a seasonally adjusted basis. That’s down slightly from the 0.9% rate measured in October, but higher than the preceding three months.

What goods did prices increase the most for?

• Here’s a rundown of the common items which have seen the largest increase in inflation year-over-year (notable monthly changes in parentheses):
• Fuel oil increased 59.3% over the last 12 months.
• Gasoline prices for all types of gas increased 58.1%.
• Car and truck rental increased 37.2%.
• Used cars and trucks increased 31.4%.
• Utility gas service (piped) increased 25.1%.
• Beef steaks increased 24.6%.
• Lodging away from home increased 22.2%.
• Bacon, breakfast sausage, and related products increased 17.8%.
• Men’s suits, sport coats, and outerwear increased 14.1%.
• Furniture and bedding increased 11.8%.
• New vehicles increased 11.1%.
• Women’s dresses increased 8.6%.
• Eggs increased 8%.
• Fresh fish and seafood increased 8%.
• Chicken increased 9.2%.
• Coffee increased 7.5%.
• Apples increased 7.4%.
• Fresh whole milk increased 6.6%.
• Electricity increased 6.5%.
• Food at home increased 6.4%.
• Food away from home increased 5.8%.
• Fruits and vegetables increased 4%.

What is inflation and how is it measured?

• Inflation is a measure of the decline of purchasing power for a given currency over time, which in the U.S. means that a dollar effectively buys less than it did in prior periods because prices rise.
• The most common way inflation is measured is through the Consumer Price Index for Urban Consumers (CPI-U), which shows changes in prices paid for a “representative basket of goods and services” by an urban consumer group representing about 93% of the U.S. population.
• CPI-U includes food, energy, commodities like cars and clothes, plus services such as rent and healthcare; and the relative importance of each to the overall basket shifts according to its proportion of all spending in a given month. This overall number is known as “headline” CPI, although economists also track a metric called “core” CPI which excludes food and energy because those categories tend to have more volatility.
• The Federal Reserve aims to keep inflation at about 2% as part of its dual mandate of promoting stable prices and full employment, as a modest amount of inflation is viewed as an optimum policy in terms of encouraging consumer spending without penalizing savings and investment. When inflation starts to get out of control, the Fed raises interest rates to encourage more savings and less consumer spending.

— Eric Revell

(Photo Credit: iStock.com / sefa ozel)