Inflation Surged in November
Consumer Demand Keeps Prices Higher
Inflation in the US surged to its highest level in almost 40 years in November. Strong consumer demand and supply-chain delays drove prices for consumer goods and services up 6.8% year-over-year. This marks the most significant uptick in inflation since 1982. It is also the sixth month in a row in which inflation was above 5%. The Core Price Index, which excludes food and energy, two categories which are typically volatile, increased 4.9%. That is higher than the 4.6% increase seen in October.
It is worth noting that the data is mostly from before the Omicron variant of COVID-19 began to spread. That could impact consumer demand in the coming weeks.
Vehicles Led the Surge in November
Driving the surge in inflation during November were vehicles, furniture, rent, airline tickets, and gasoline. Gas prices were up 6.1% for the second month in a row despite energy prices beginning to ease. Food prices increased 6.1% year-over-year, while prices for used vehicles soared 31.4%. Food and energy saw the biggest 12-month price gains in 13 years.
While inflation is at levels not seen in a long time, most economists are not too worried given other trends that indicate the economy’s strength. Consumer spending hasn’t slowed, more people are returning to work, and interest rates remain low. As a result, consumers have been more willing to absorb higher prices for just about every category.
Oil Prices Aren’t Expected to Rise Forever
With oil prices flat since the end of October, even with the economy recovering, investors are now wondering how fast oil prices will rise, if they will rise at all. After all, the White House and other countries are accessing their strategic reserves to bring fuel prices down. Travel restrictions put in place because of the Omicron variant are also likely to weigh on oil prices.
Inflation showed no sign of abating in November as consumers continued to hit stores and supply-chain delays impacted inventories. But with the economy booming and oil prices coming back down, record inflation may not be here to stay.
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