US President Joe Biden (Image: AP)
President Joe Biden has made fighting US inflation his “top priority” after government data showed it reached a 30-year high last month, underscoring the continued threat to his presidency and the economic recovery.
The sharp spike in the consumer price index (CPI) in the Labor Department data released Wednesday surprised economists and the White House alike, and came as Biden heads to Baltimore to promote the $ 1.2 trillion infrastructure overhaul he argues can turn the tide.
“Inflation hurts Americans pocketbooks, and reversing this trend is a top priority for me,” Biden said after the report was released.
“I am travelling to Baltimore today to highlight how my infrastructure bill will bring down these costs, reduce these bottlenecks and make goods more available and less costly.”
Inflation had remained muted in recent years, but roared back with a vengeance this year as American businesses began resuming normal operations with the help of Covid-19 vaccines.
Prices were pressured by high demand from consumers flush with cash combined with shortages of US workers and snarls in supply chains worldwide that slowed deliveries of crucial components such as semiconductors, that are critical for producing automobiles and electronic devices.
While Biden has argued that the increases will prove temporary, they have given his opponents a potent counterargument to the spending plans he has staked his presidency on as his approval ratings sag.
He scored a victory when Congress passed the infrastructure overhaul last week, but the $ 1.85 trillion Build Back Better plan to improve social services remains mired by infighting among Biden’s Democrats who narrowly control the legislature.
Democratic Senator Joe Manchin, who has objected to the plan’s cost, tweeted following the CPI report saying, “By all accounts, the threat posed by record inflation to the American people is not ‘transitory’ and is instead getting worse.”
– Prices up everywhere –
The 6.2 percent climb in CPI compared to October 2020 was the sharpest annual increase since November 1990, and came as costs for everything from automobiles to gasoline increased, the Labor Department said.
Compared to September, CPI rose 0.9 percent, more than double the increase in the prior month and above forecasts from economists.
Much of the surge was seen in energy prices, with gasoline spiking 6.1 percent last month alone, and fuel oil seeing a massive 12.3 percent increase.
Biden said he has asked his National Economic Council to look for ways to lower these prices and also told the Federal Trade Commission to crackdown on price gouging in the energy market.
Grocery prices also climbed last month, with food at home rising one percent, while food away from home, such as meals at restaurants, saw a 0.8 percent increase.
Americans have been able to resume dining out, but restuarants like other businesses nationwide have struggled to bring back workers shed during the pandemic.
Used cars have seen an abnormal price surge throughout 2021 that bolstered overall inflation. After dipping in August and September, the October report showed they again shot up 2.5 percent.
– ‘Going to be horrible’ –
Amid a nationwide housing shortage, housing costs including rent rose, with a 0.5 percent increase in the shelter category, according to the report.
Food and energy prices are volatile, but even with those elements excluded, “core” CPI climbed 0.6 percent last month compared to the 0.2 percent increase in September.
Over the past 12 months, it increased 4.6 percent, its biggest rise since August 1991, the report said.
“I hate to say this, but October’s core CPI is just a taster; the next few months are going to be horrible,” Ian Shepherdson on Pantheon Macroeconomics tweeted.
The rapid price increases also create a quandary for the Federal Reserve, which announced it will start dialing back its monthly purchases of bonds and securities meant to help the economy during the pandemic, but said it will remain patient before raising interest rates.
Some economists think the central bank may have to move more aggressively to contain prices.
Kathy Bostjancic of Oxford Economics warned inflation may get worse in the months to come before decelerating next year, but if that does not happen, the central bank may have to quickly shift gears.
“Strong demand and constrained supply will drive inflation higher in early 2022 which could lead the Fed to raise rates earlier than our December 2022 forecast,” she said, adding it may also be forced to increase the pace of its tapering.