Prices rise at highest rate in nearly 40 years

WASHINGTON — Prices last month rose at the fastest pace in nearly 40 years, increasing 6.8 percent over the same period a year ago, as inflation continues to squeeze households and businesses and complicates the political environment for Congress and the White House.

Consumer price index data released Friday by the Bureau of Labor Statistics showed that prices rose 0.8 percent in November over October, with inflation spreading further through the economy.

The November data marked the largest 12-month increase since June 1982, during a period when inflation was more of a scourge on daily life than most millennials have ever seen. Current inflation dynamics have been spurred by a devastating pandemic that roiled the global economy, upsetting the workforce and supply chains — while stimulus aid helped unleash high demand.

The increases span just about every sector, from pork, poultry and produce to housing and sporting goods. Companies large and small are raising prices or making tough decisions to make up for the rising costs of hiring, transportation and basic goods.

In time, it is possible that lower gas and energy prices or unclogged supply chains will help steer prices back down to more-sustainable levels. But it is unclear when that will happen. And in the meantime, businesses and consumers could start to change their expectations of what still is to come.

"Yes, inflation can abate, but what (policymakers) care about is: Is it significant or insignificant to peoples' lives and decision-making?" said Diane Swonk, chief economist at Grant Thornton. "This is inflation that's not likely to be insignificant anytime soon, and that's a problem."

Inflation has emerged as a top political concern ahead of the 2022 midterm elections, with the cost of food or gas often a test for how people perceive the economy.

Republicans have criticized the high numbers, blaming Democrats' stimulus as the culprit and warning against future packages.

"Today's jaw-dropping inflation report should alarm every single American, but especially policymakers," U.S. Sen. Pat Toomey, R-Pa., said in a statement Friday. "Hardworking American families are suffering as a direct result of the Biden administration's reckless borrowing and spending and anti-energy policies."

Democrats rallied behind a different message, saying their Build Back Better spending proposals are key to lowering costs, including for child care and health care.

"We've never had this kind of growth in 60 years, but inflation is affecting people's lives," President Joe Biden said Friday. "The reason why … economists think (Build Back Better) is going to, in fact, diminish the impact on inflation is because it's reducing costs for ordinary people.“

The November increases were driven by price hikes in most of the categories tracked, similar to October inflation. Indexes for gasoline, shelter, food, used cars and trucks and new vehicles were among the larger contributors. Airline fares also increased in November, rising 4.7 percent from October after declining over the previous few months as people geared up for holiday travel.

Roughly half of the month-over-month increase in the consumer price index was due to price increases in cars and energy. The energy index was up 3.5 percent in November, and measures of gasoline costs were up 6.1 percent. Recent moves by the Biden administration intended to bring prices down at the pump are not reflected in Friday's data.

The cost of medical care has risen in four of the past five months, although it grew at a slower pace in November than October. Swonk noted that coronavirus cases have filled hospitals to capacity, which can prompt hospitals to pause elective surgeries.

The price increases can also be seen in the grocery store aisles, with food companies including Campbell Soup, Kraft Heinz and Mondelez all announcing higher prices on items such as soup, macaroni and cheese, crackers and cookies.

Federal data showed prices for "food at home," namely groceries, were up 6.4 percent in the past year and that the cost of "food away from home" climbed 5.8 percent. Two of Iowa’s top products cost more: Bacon (up 21 percent) and eggs (up 8 percent).

Friday's inflation report showed rent was up 0.4 percent in November compared with the month before, and 3 percent compared with last year, in part because of soaring home prices and supply chain issues limiting construction of new homes.

By many measures, the economy has made tremendous progress since it was thrust into a recession in early 2020. The labor market has added 6 million jobs since Biden took office. Economic growth is surging far faster than most economists forecast earlier in the pandemic. The stock market is also up roughly 25 percent.

But inflation has proved to be one of the most visceral ways people judge economic recovery from the pandemic. White House officials have been frustrated by a disconnect between such strong progress and a public discontent that is showing up in opinion polling and Biden's approval ratings.

In recent months, Federal Reserve policymakers have had to ditch their long-held message that inflation is limited and temporary, as that conflicted with what's been unfolding nationwide. Economists increasingly expect the Fed will hike rates as early as next spring, much faster than projected earlier this year.