By John Meyer, financial consultant. Eurasia Business News, December 12, 2021
Times Square, Manhattan, New York City- Photo credit : Swann Collins
U.S. inflation hit a 39-years record in November, reaching 6.8% from a year earlier. This has never been seen since June 1982.
The Consumer Price Index for All Urban Consumers (CPI-U), released each month by the U.S. Bureau of Labor Statistics increased 0.8 percent in November on a seasonally adjusted basis. The CPI-U rose 0.9 percent in October.
The indexes for gasoline, shelter, food, used cars and trucks, and new vehicles were among the larger contributors to this increase in November, as it has been over 2021. The energy index rose 3.5 percent in November as the gasoline index increased 6.1 percent and the other major energy component indexes also rose.
The food index increased 0.7 percent as the index for food at home rose 0.8 percent. The index for all items less food and energy rose 0.5 percent in November following a 0.6-percent increase in October. Along with shelter, used cars and trucks, and new vehicles, the indexes for household furnishings and operations, apparel, and airline fares were among those that increased.
The indexes for motor vehicle insurance, recreation, and communication all declined in November. The index for all items less food and energy (which are the most volatile) rose 4.9 percent over the last 12 months, while the energy index rose 33.3 percent over the last year, and the food index increased 6.1 percent. These changes are the largest 12-month increases in at least 13 years in the respective series.
The shelter index increased 0.5 percent over the month, as the indexes for rent and owners’ equivalent rent both rose 0.4 percent; these increases were the same as in October.
The drivers of this inflation remain unchanged: they include housing prices, food and energy prices, strong consumer demand after the traumatic covid-19 lockdowns and disruption to supply chains from Asia.
On Wall Street, at the start of the session, the stock market did not overreact to this price surge. Investors seem to have taken notice of the installation of inflation in the landscape, especially since the U.S. Federal Reserve has clearly admitted in November that inflation is not transitory, after voicing the contrary. Its monetary policy committee is meeting next week and will have to specify the terms of the slowdown of its monetary stimulus effort, made of billions of dollars injected in the economy. The direct result was the strong increase of assets prices (real estate, stocks, bonds). The new line of the U.S. central bankers paves the way to raise interest rates in the spring 2022 to curb inflation.
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