U.S. inflation jumped 7.9% this past year — before oil prices spiked – National


Propelled by surging costs for gas, food housing, consumer inflation jumped 7.9 per cent over the past year, the sharpest spike since 1982 likely only a harbinger of even higher prices to come.

The increase reported Thursday by the Labor Department reflected the 12 months ending in February didn’t include most of the oil gas price increases that followed Russia’s invasion of Ukraine on Feb. 24. Since then, average gas prices nationally have jumped about 62 cents a gallon to $4.32, according to AAA.

Even before the war further accelerated price increases, robust consumer spending, solid pay raises persistent supply shortages had sent U.S. inflation to its highest level in four decades. What’s more, housing costs, which make up about a third of the government’s consumer price index, have risen sharply, a trend that’s unlikely to reverse anytime soon.

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The government’s report Thursday also showed that inflation rose 0.8% from January to February, up from the 0.6 per cent increase from December to January.

For most Americans, inflation is running far ahead of the pay raises that many have received in the past year, making it harder for them to afford necessities like food, gas rent. As a consequence, inflation has become the top political threat to President Joe Biden congressional Democrats as the midterm elections draw closer. Small business people say in surveys that it’s their primary economic concern, too.

Seeking to stem the inflation surge, the Federal Reserve is set to raise interest rates several times this year beginning with a quarter-point hike next week. The Fed faces a delicate challenge, though: If it tightens credit too aggressively this year, it risks undercutting the economy possibly triggering a recession.

From January to February, nearly every category of goods services got pricier. Grocery costs jumped 1.4 per cent, the sharpest one-month increase since 1990, other than during a pandemic-induced price surge two years ago. The cost of fruits vegetables rose 2.3 per cent, the largest monthly increase since 2010. Gas prices spiked 6.6 per cent, clothing 0.7 per cent.


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Poll finds Canadians cutting back on spending in face of rising inflation


Poll finds Canadians cutting back on spending in face of rising inflation – Feb 28, 2022

For the 12 months ending in February, grocery prices leapt 8.6%, the biggest year-over-year increase since 1981, the government said. Gas prices are up a whopping 38%. And housing costs have risen 4.7 per cent, the largest yearly jump since 1991.

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Energy prices, which soared after Russia’s invasion of Ukraine, jumped again this week after Biden said the United States would bar oil imports from Russia. Oil prices did retreat Wednesday on reports that the United Arab Emirates will urge fellow OPEC members to boost production. U.S. oil was down 12 per cent to $108.70 a barrel, though still up from about $90 before Russia’s invasion.

Yet energy markets have been so volatile that it’s impossible to know if the decline will stick. If Europe were to join the U.S. the United Kingdom bar Russian oil imports, analysts estimate that prices could soar as high as $160 a barrel.

The economic consequences of Russia’s war against Ukraine have upended a broad assumption among many economists at the Fed: That inflation would begin to ease this spring because prices rose so much in March April of 2021 that comparisons to a year ago would show declines.

Should gas prices remain near their current levels, Eric Winograd, senior economist at asset manager AllianceBernstein, estimates that inflation could reach as high as 9 per cent in March or April.

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The cost of wheat, corn, cooking oils such metals as aluminum nickel have also soared since the invasion. Ukraine Russia are leading exporters of those commodities.

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Even before Russia’s invasion, inflation was not only rising sharply but also broadening into additional sectors of the economy. Many prices have jumped over the past year because heavy demhas run into short supplies of items like autos, building materials household goods.

But even for some services unaffected by the pandemic, like rents, costs are also surging at their fastest pace in decades. Steady job growth high home prices are encouraging more people to move into apartments, elevating rental costs by the most in two decades. Apartment vacancy rates have reached their lowest level since 1984.


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Inflation rate likely to get worse: expert – Feb 16, 2022

In the final three months of last year, wages salaries jumped 4.5 per cent, the sharpest such increase in at least 20 years. Those pay raises have, in turn, led many companies to raise prices to offset their higher labour costs.

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Soaring energy costs pose a particularly difficult challenge for the Fed. Higher gas prices tend to both accelerate inflation weaken economic growth. That’s because as their paychecks are eroded at the gas pump, consumers typically spend less in other ways.

That pattern is akin to the “stagflation” dynamic that made the economy of the 1970s miserable for many Americans. Most economists, though, say they think the U.S. economy is growing strongly enough that another recession is unlikely, even with higher inflation.

© 2022 The Canadian Press



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