US inflation reaches 7% in December, highest since 1982

• CPI rose by 0.5 % monthly and 7 % on an annual basis in December

• The index rose by 0.6 % and 5.5 %, respectively, excluding food and energy

U.S inflation rise rapidly in December at its highest level since 1982, as the economic recovery gathered traction and demand outpaced the supply of labor and commodities.

The consumer price index rose 0.5 percent in December after rising 0.8 percent in November, according to the Labor Department on Wednesday. 

The CPI increased by 7.0 percent in the year to December. This was the largest year-on-year gain since June 1982, and it came on the heels of a 6.8 percent increase in November.

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The so-called core price index, which excludes food and energy, increased 5.5 percent year on year in December. This was a substantial increase than the 4.9 percent increase in November, and it was the highest rate since 1991.

Dow Jones polled economists predicted that the metric will rise 7% year on year and 0.4 percent from November.

The increased demand for used cars has been encouraged by the price increase in new automobiles as a result of the worldwide semiconductor-chip shortage, which has pushed up the costs for the former. Used vehicle and truck prices are up 37.3 percent, following a 3.5 percent gain last month, contributing to growing inflation.

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The index of airline fares and personal care rose 2.7 percent and 0.5 percent respectively in December while tobacco and education increased 0.7 percent and 0.1 percent respectively. 

The apparel index increased by 1.7 percent in December after positioning at 1.3 percent in November, while the new vehicle index increased by 1.0 percent in December, following a 1.1 percent gain in November.

Food prices jumped 0.5 percent in December and 6.3 percent year on year, the largest increase since October 2008.

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Shelter costs, which account for almost one-third of overall costs, climbed 0.4 percent month over month and 4.1 percent year over year. 

In contrast, energy costs dipped 0.4 percent for the month, with fuel oil down 2.4 percent and gasoline falling 0.5 percent. Nonetheless, the complex as a whole grew 29.3 percent in a year, with gasoline rising 49.6 percent.

The December inflation figures also reflect the early impact of the Omicron variant, which poses a fresh danger to the economy as the pandemic approaches its third year.

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Meanwhile, in congressional testimony Tuesday, Federal Reserve Board Chairman Jerome Powell expressed optimism that supply-chain difficulties will alleviate this year, helping to bring inflation down.

U.S employment 

Employment in the United States increased at a steady rate in December, despite labor shortages, and is projected to stay moderate as Covid-19 infections spread exponentially.

The Labor Department reported that nonfarm payrolls expanded by 199,000 jobs last month. The November jobless figure was also reduced to 249,000 from 210,000 previously reported, while the unemployment rate decreased to 3.9 percent from 4.2 percent.

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December's low employment indicates labor shortages.

Picture Credits: CNN