Inflation soared again in January, adding another .6% in January on a seasonally adjusted basis according to this morning’s Consumer Price Index report from the Bureau of Labor Statistics. This brings overall inflation to 7.5% — the highest level in almost 39 years.
Increases in food, electricity and shelter added the largest increases to the seasonally adjusted all items increase. The food index, in particular, added another .9% in January after increasing .5% in December. Food prices in general have been one of the largest contributors to inflation this past year, with January being the seventh time in the last 10 months prices in the sector have increased at least .5%, the BLS reports.
The food at home index has risen 7.4% over the last 12 months with all of the six major grocery store food group indexes rising over the same period. By far the largest increases were the prices for meat, poultry, fish and eggs which rose a whopping 12.2% over the last year.
Jonathan Silver, Founder and CEO of Affinity Solutions tells GOBankingRates that this rapid increase in prices is based on three factors.
“First, we’ve seen the CPI at or below 2.5% for over a generation so this increase is a shock to the system. Additionally, we’re seeing prices rise rapidly on consumer needs such as gas, milk and meat which hurts people’s wallets, especially among lower-income individuals. Finally, wages haven’t kept up with inflation even at a time when there’s a labor shortage and workers have considerably more leverage.”
Indeed the wage-inflation mismatch has only exacerbated the impact rising prices have had on the average consumer’s wallet. The largest increases also seem to be coming from sectors that are more directly tied to everyday consumer needs. Both the shelter index and the indexes for household furnishings and operations were among the indexes that increased significantly in January. Although the gas index finally came off, decreasing .8% in January after an unrelenting ride through most of late 2021, the overall index rise was supported by a rise in electricity which put on another 4.2% in prices.
Prices are largely expected to fall in the coming months, as the Fed has announced plans for several rate hikes in 2022. Plus, the supply chain disruptions that have largely contributed to surging prices should eventually sort themselves out.
Silver notes however that indexes for food might not come off as easily.
“While we’re hopeful prices will begin to decline in the coming months, prices at grocery stores and restaurants may take longer to adjust downward,” he said.
He adds that retail food prices have surged across categories thanks to the supply chain, bad weather and strong demand.
Ahead of the report, stock markets seemed largely complacent, seeming to have already priced in rate hike expectations.
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