RAPID INFLATION EXCEEDING FORECASTS | NY Times

Intro: A key inflation measure released on Thursday showed that prices are climbing at the fastest pace in 40 years and broadening to touch nearly every corner of the American economy, heightening the risk that they will stay elevated for longer and that policymakers may have to react more aggressively.

Rapid Inflation Stokes Unease From Wall Street to Washington

Consumer Price Index data showed prices climbing faster than expected, picking up across a broad array of goods and services

(Note: Does not include food and energy)

By Jeanna Smialek and Madeleine Ngo

Feb. 10, 2022

 

"Markets tumbled after the government released Consumer Price Index data for January, which showed prices jumping 7.5 percent over the year and 0.6 percent over the past month, exceeding forecasts. More worrying were the report’s details, which showed inflation moving beyond pandemic-affected goods and services, a sign that rapid gains could prove longer lasting and harder to shake off. . .

Economists thought price gains would fade quickly in 2021 — making now-infamous predictions that inflation would prove “transitory” — only to have those projections proved wrong time and again as booming consumer demand for goods collided with roiled global supply chains that could not ramp up production fast enough.

Lately, it is more than just shortages of goods at play. Price gains are increasingly hitting consumers in hard-to-avoid ways as they show up in necessities: January’s inflation reading was driven by food, electricity and shelter costs, the Bureau of Labor Statistics said. . .

Understand Inflation in the U.S.

• Inflation 101: What is inflation, why is it up and whom does it hurt? Our guide explains it all.
• Your Questions, Answered: We asked readers to send questions about inflation. Top experts and economists weighed in.
• What’s to Blame: Did the stimulus cause prices to rise? Or did pandemic lockdowns and shortages lead to inflation? A debate is heating up in Washington.
• Supply Chain’s Role: A key factor in rising inflation is the continuing turmoil in the global supply chain. Here’s how the crisis unfolded.

Ryan Sweet, an economist at Moody’s Analytics, estimated that inflation was costing the average household $276 a month, compared with a more normal rate of inflation, which had been hovering just around 2 percent before the pandemic. . .

> The White House has introduced policies that might help to ease inflation slightly — discussing plans to help place military veterans into the short-staffed trucking industry, for instance — but the Fed is primarily in charge of slowing down demand to keep prices under control.

> Fed officials have already shifted away from trying to foster a quick economic rebound and toward bringing inflation down. . .

> The inflation reading sent stocks down and government bond yields up. The S&P 500 dropped 1.8 percent, while the Nasdaq composite fell 2.1 percent. The yield on 10-year U.S. Treasury notes rose 0.1 percentage points, to about 2.03 percent, the highest level since November 2019.

But emerging trends could keep inflation high.

--- Jobs data released last week showed that average hourly earnings climbed rapidly — and much more than economists expected, though still not quite enough to keep up with rapid inflation. Rising pay could lift prices if companies pass those costs along to customers to protect their own profit margins.

For now, corporate profits look strong and productivity is high, which may give companies room to absorb bigger wage bills. And if pay continues to rise less quickly than prices, it may weigh on demand as consumers struggle with costs. . ."

Reference: https://www.nytimes.com/2022/02/10/business/economy/inflation-cpi-january-2022.html