Business

Inflation hits another 40-year high as consumer prices surge to 7.5%

Runaway inflation skyrocketed to its highest rate in 40 years in January as consumer prices surged 7.5% from 12 months ago — forcing the average American household to fork out an extra $276 per month. 

The latest spike, which outstripped the 7.2% increase predicted by economists, marked the highest annual increase for consumer prices since February 1982, the Labor Department said Thursday. 

On a monthly basis, the Consumer Price Index — a closely tracked inflation gauge that details the costs of goods and services — rose 0.6% from December to January. 

Increases in the cost of food, electricity and rent were among the largest contributors to the red-hot rate, the Labor Department said. 

And there are few signs that the Biden administration will be able to slow the already months-long surge that has been hammering Americans any time soon. 

Gas prices have spiked over the last year due to supply issues and geopolitical tensions. Christopher Sadowski

Inflation is now costing the average American household an additional $276 per month in expenses, with millennials, Hispanics and the middle class especially feeling the pinch, according to a new study. 

Ryan Sweet, a senior economist at Moody’s Analytics, studied the average spent by a US household during 7% inflation and compared those figures to data from 2018 and 2019 — when inflation hovered around 2.1%. 

He came up with the $276 figure by factoring in different prices for goods and services. 

Renters feel the pressure 

A study by Wells Fargo found that those who pay rent are feeling the squeeze even more since a greater share of their income is spent on housing. Middle-class households were also hard-hit given that they spend a greater share of their income on transportation and fuel costs, which have also risen. 

Food prices have spiked considerably over the last 12 months, while supply chain issues have led to product shortages in many areas. Xinhua News Agency via Getty Ima

The heated inflation reading will only increase the pressure on President Biden, who despite the pain being felt on the home front has repeatedly downplayed the situation and insisted the US economy is strong. 

The president got testy Thursday when asked by NBC’s Lester Holt about his comments that the record highs were only temporary and projected to ease by the end of the year. 

“Americans are wondering what your definition of temporary is,” Holt said in the interview. 

“Well, you’re being a wise guy with me a little bit,” Biden said. “And I understand, that’s your job.” 

The president once again said he expects inflation to “taper off” through the year in the interview, filmed in Culpeper, Va., after a speech urging Democrats to pass his stalled $2.2 trillion Build Back Better Act as a way to alleviate inflation. 

Sen. Joe Manchin (D-W.Va.), who has already said he won’t support the bill, warned hours earlier that only those in Washington believed “spending trillions more of taxpayers’ money will cure our problems, let alone inflation.” 

“Now, more than ever, we must remember it is not our money, it’s the American people’s money,” Manchin said. 

“It is not our economy, it’s their economy. We all have a responsibility to do all that is possible to roll back inflation and manage our debts because the longer we or the Federal Reserve waits to act, the more economic pain will be caused.” 

Rep. Kevin Brady (R-Texas), the top GOPer on the House Ways and Means Committee, raged that Biden “just doesn’t get it.” 

New York Post composite

“America under his leadership is on the verge of, if not already in, a crippling wage-price spiral that will end badly for families, small businesses and the US economy. But he’s doing nothing about it, and his Build Back Better bill would make it worse,” Brady insisted. 

Biden has pointed to recent jobs numbers as a sign of improving economic conditions. US employers unexpectedly added 467,000 jobs in January, while the unemployment rate is hovering at 4% — close to what the Fed considers to be full employment. 

But high inflation has effectively erased wage gains that would have otherwise benefited American workers in a tight labor market. 

The latest inflation figures will only increase scrutiny of the Federal Reserve’s plan to tighten monetary policy following a lenient approach during the COVID-19 pandemic. 

The central bank is expected to enact its first interest-rate hike in more than three years in March, with several more hikes expected throughout the year as the Fed seeks to curb ­inflation. 

Interest rate hikes — the Fed’s key lever to fight inflation — are not an immediate fix, according to Bankrate chief financial analyst Greg McBride. Supply chain disruptions, worker shortages and shipping delays that have led to shortages of key products in many cities continue to hamper the economy. 

“Omicron has caused factory shutdowns and threatened port closures in parts of Asia, which will only perpetuate the type of supply chain constraints that are driving inflation higher,” McBride said. “Expected interest rate hikes from the Federal Reserve will slow demand somewhat, but won’t fix the supply chain.” 

Additional reporting by Steven ­Nelson