Alice Green | Aug 6, 2022 | 3
Inflation in US Hits Decades-High Record of 8.5%
Inflation is racing upwards at its fastest pace since 1981, reports the Labor Department, with the ever-increasing cost of groceries, gas, and shelter making a mockery of the pay raises many Americans received this year.
Inflation jumped 8.5% over the past 12 months – including a 0.8% uptick from January to February and a 1.2% increase from February to March – while Russia’s invasion of Ukraine continues to exacerbate supply chain bottlenecks, disruptions to food and energy markets, and other problems linked to the coronavirus pandemic.
Shelter costs increased 0.5% in March and are up 5% for the year, food rose 1% in March and is up 8.8% for the year, and transportation jumped 10.7% in March and is up 23.6% for the year.
The cost of used vehicles dropped 3.8% in March but is up 35.5% for the year.
Real worker earnings dipped 0.8% in March (the 11th consecutive decrease) and are down 2.5% from last year despite a 5.6% increase in the average hourly wage.
Adding fuel to the fire was President Joe Biden’s decision to ban Russian oil, which drove gas prices up by more than 18%. The current average price of gas in America is $4.09 per gallon, roughly 43% higher than this time last year.
Higher pump prices result in larger transportation costs, which get passed along to consumers as increased costs for goods and services.
Core inflation (a metric that excludes food and energy) jumped 6.5% over the past year, the largest YOY increase since 1982, but rose just 0.3% for the month of March.
“The big news in the March report was that core price pressures finally appear to be moderating,” writes Andrew Hunter of Capital Economics.
Another factor at play here is the Biden Administration’s $1.9 trillion stimulus program, which handed extra cash to to Americans during a post-pandemic surge in demand that has businesses struggling to keep up.
The Federal Reserve is planning to implement a series of interest rate hikes to curb inflation, though the Russia/Ukraine conflict will continue to impact prices. The rate hikes are expected to be much steeper than had been planned, and some fear that an overly ambitious approach will push the economy into a recession without slowing inflation.
If all goes according to plan, inflation should be art roughly 4.5% by the end of the year.
Author’s Note: All of this reflects poorly on President Joe Biden (whose approval dropped to 42% this week) and Democrats’ chances in the upcoming midterm elections. As noted in a previous article (click here to read), even Gen Z voters are looking to the Republican Party for answers.