October’s U.S. inflation rate sped to 6.2 percent, its fastest since 1990, as prices rose throughout the economy, touching everything from groceries to cars as consumers continued spending without restraint.
The Consumer Price Index (CPI) gained 0.9 percent from September.
October marked the fifth consecutive month in which inflation grew by at least 5 percent, The Wall Street Journal noted.
The core CPI, which ignores food and energy costs, ran at 4.6 percent in October, faster than September’s 4 percent and also faster than at any time since 1991.
Among the items for which prices bloated most:
- gasoline, 50 percent more expensive year over year;
- pork, 14 percent;
- new vehicles, 9.8 percent;
- restaurant menu prices 5.2 percent, the biggest yearly jump since 1982.
The cost of tires and sporting equipment shot up their fastest since the early 1980s, while prices for bedding and furniture soared at their quickest pace since 1951, according to the WSJ.
Consumers spent 1.6 percent more in this year’s third quarter than in last year’s, still an increase but also a steep drop from the 12-percent spending splurge in this year’s second quarter.
That drop was not due to consumers’ sudden impulse to be thrifty but to a pervasive shortage of durable goods, particularly new cars, the WSJ noted.
Also in October, U.S. wholesale prices rose 0.6 percent, meeting economists’ expectations, after adding 0.5 percent in September.
As it did in September, October’s Producer Price Index (PPI) was up 8.6 percent year over year.
The core PPI, which also ignores food and energy costs, gained 0.4 percent in October and 6.2 percent compared to a year earlier.
Sixty percent of small-business owners have passed cost increases on to their customers in the past 90 days, according to a November survey by the WSJ.
Eighty percent of the companies said they now pay higher wages, 72 percent said suppliers had raised prices, and more than half reported higher costs for raw materials.
Three key factors are driving inflation’s near-record pace.
First, the post-COVID economic rebound has been faster than expected. Many middle- and upper-income households piled up cash during the COVID era, including government stimulus checks totaling $4,000 for every adult in the country. When the lockdown ended, people were eager to spend their cash on pent-up needs, from new clothes to vacations.
Second, the speed of the recovery caught suppliers and logistics services by surprise. Manufacturers were unable to retool fast enough to meet surging demand and there were not enough shipping containers, dock workers, or truck drivers to move merchandise as fast as it was arriving.
Shortages drove up prices, which eager consumers willingly paid.
Third, millions of workers in low-wage, dead-end jobs were idled by the shutdown and took the time to re-evaluate their futures. Many decided to seek a different path, spawning what has been referred to as the “Great Resignation” and the growing “anti work” movement (see related story in this issue).
Yet, despite these strong inflation facts where prices are rising across a broad spectrum of products and services, this past Sunday, former Fed head, and now U.S. Treasury Secretary, Janet Yellen—who along with the current Federal Reserve mouthpiece Fed Chair Jerome Powell has been long spewing that inflation is “temporary—now says inflation will be tamed when the COVID War is won.
Totally ignoring the trillions of dollars of cheap money the Banksters and Washington have been pumping into equities and the economy, Yellen screeched; “The pandemic has been calling the shots for the economy and for inflation,” and that to get inflation down, “I think continuing to make progress against the pandemic is the most important thing we can do.”
It is believed the Federal Reserve winding down their monthly $120-billion bond purchases is a prelude to raising interest rates next year, however, as Gregory Mannarino has noted, the $15 billion pullback is small. And with workers demanding more pay as prices spike, a wage-price spiral, in which the two chase each other higher, will put more pressure on the Federal Reserve to raise interest rates.
TREND FORECAST: We continue our prediction made in “Stagflation Worrying Investors? Watch Out for Dragflation!” (19 Oct 2021) that the real danger taking shape is Dragflation, in which the economy shrinks as prices rise.
Inflation keeps rising, jobs go begging, price-earnings ratios are at extremes, and Wall Street is riding for a fall.
From job creation to commodities shortages, we forecast that the world’s economy—after expanding for much of this year—will contract amid supply shortages and logistics snarls that will last for months, cutting factory output and hobbling consumer spending, as is already happening in Germany and China. (See related stories).
Dragflation will make any return to post-COVID growth more difficult and take longer, especially as the Fed shuts off the spigot of cheap money and raises interest rates.
Also, the shortages pushing prices up will worsen as mandates for masks and proof of vaccinations keep people away from their jobs, going to events, restaurants, travel, etc., and the stricter the mandates, the deeper the economy drags down.