Inflation concerns continued following the release of reports on consumer and producer prices for October on Wednesday and Tuesday respectively. According to the Labor Department reports, consumer prices saw their highest year-to-year increase since 1990 in October.
“The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.9% in October on a seasonally adjusted basis after rising 0.4 percent in September,” the Labor Department said in its Wednesday report. “Over the last 12 months, the all items index increased 6.2% before seasonal adjustment.”
According to the Labor Department, increases in consumer price indexes for individual sectors were “broad-based”.
“The energy index rose 4.8% over the month, as the gasoline index increased 6.1% and the other major energy component indexes also rose,” the Labor Department report said. “Along with shelter, used cars and trucks, and new vehicles, the indexes for medical care, for household furnishing and operations, and for recreation all increased in October.”
In addition to consumer inflation, producer prices rose 8.6% in October compared to the same time a year earlier. That tied September’s year-over-year inflation record.
“Over 60% of the October increase in the index for final demand can be traced to a 1.2% rise in prices for final demand goods,” the department said in its producer price report. “The index for final demand services moved up 0.2%, and prices for final demand construction advanced 6.6%.” That demand increase has run into persistent supply shortages from COVID-related factory shutdowns in China, Vietnam and other overseas manufacturers.
“Inflation hurts Americans pocketbooks, and reversing this trend is a top priority for me,” President Biden said in a statement. “And I want to reemphasize my commitment to the independence of the Federal Reserve to monitor inflation, and take steps necessary to combat it.”
Economists still expect inflation to slow. As COVID-19 fades, consumers should spend more on travel, entertainment and other services and less on goods such as cars, furniture, and appliances. This change in spending behavior would reduce pressure on supply chains. However, no one knows how long that might take.