January Inflation Surges 7.5%, Hitting A New 40-Year High

Inflation continues to run red-hot in January, with consumer prices notching another fresh four-decade high — indicating no sign of easing anytime soon and cementing the Federal Reserve’s prospects of aggressively raising interest rate hikes next month to combat the inflationary pressure hurting Americans.

The Bureau of Labor Statistics’ Consumer Price Index (CPI) report — a key metric that measures what consumers pay for the cost of goods and services, showed prices surging at an alarming rate of 7.5% in January from a year ago. That marked the fastest increase since February 1982, when inflation hit 7.6%.

Economists predicted inflation data to show prices rising 7.3% in January from the previous year and 0.5% on a monthly basis. Dow Jones estimated a 7.2% for the closely watched inflation gauge, while Bloomberg was looking for a 7.3% rise.

“Increases in the indexes for food, electricity, and shelter were the largest contributors to the seasonally adjusted all items increase,” the Bureau of Labor Statistics said in a release.

Consumer prices increased 0.6% on a monthly basis, a slight uptick from December’s 0.5% reported.

Excluding food and energy prices, the core measure of consumer price climbed 6% in January over the last 12 months, the steepest rate of increase last seen since August 1982. It sharply rose from the 5.5% annual gain reported in December. On a monthly gain, the core CPI Index rose 0.6% in January.

Price increases were widespread. Energy prices remain to be a key benefactor to the overall CPI and climbed 27% on a year-over-year basis in January. Within energy, fuel oil prices surged 9.5% monthly, while electricity prices jumped by 4.2% from December 2021-January 2022.

Food prices climbed drastically to a 7% higher over the year, contributing to the headline index, with dining at home and eating out each becoming more expensive. Food at home prices rose 1% during the month, compared to 0.4% reported in December, while food away from home prices rose 0.7%, slightly up from 0.6 in December. In January, grocery prices increased in five of the six major food group indexes. Cereal and bakery products increased the most in January, rising 1.8% over the month. The index for dairy rose 1.1%, while fruits and vegetable index rose 0.9% over the month. Meanwhile, meats, poultry, fish, and eggs index increased 0.3%.

Energy prices rose just 0.9% in January from the previous month and up 27% from last year. Gasoline, on average, costs 40% more than it did last year, while used car and truck prices are up 40.5%. Shelter costs, which make up about one-third of the total CPI number, increased 0.3% from December to January. Over the past year, the index has been up 4.4%, a sign that it could keep inflation readings elevated in the future.

The eye-popping hot report marked the eighth straight month in which inflation has surged more than 5 percent annually under President Biden. Following the release, Biden insisted the economy is still strong despite the hot inflation reading. Biden ignored the reading and opted to tout recent January’s jobs numbers and wage growth to claim an improving economic conditions.

However, the rising inflation is eating away at wage gains American workers have seen in recent months. Real average hourly earnings rose just 0.1% in January from the previous month, as the 0.6% inflation increase completely erased the 0.7% total wage gain it saw for the month, according to a separate report from Labor Department. On an annual basis, real earnings actually declined 1.7% in January.

“While today’s report is elevated, forecasters continue to project inflation easing substantially by the end of 2022,” Biden said. “And fortunately, we saw positive real wage growth last month and moderation in auto prices, which have made up about a quarter of headline inflation over the last year.”

Economists were expecting inflation to come down in 2022, with many projecting the end of the year to see inflationary price index to mark 3%. But those same economists were predicting that inflation would fade quickly towards the end of 2021, only to see those projections foiled

High inflation is a political liability for the White House and Democrats as Republicans continue to slam Biden’s deflection of the report and his administration policies that have exacerbated the “Biden-flation crisis.”

“January’s CPI data marks a sad anniversary for American families: one year of Joe Biden’s failed policies and reckless spending causing historic inflation and skyrocketing prices. President Biden has taken our economy and flushed it down the drain. Worse, he doesn’t seem to be bothered by that at all. While Biden is in Delaware every weekend enjoying his ice cream, families are struggling to make ends meet,” Sen. Rick Scott (R-FL), a key Senator who continues to call attention to the crisis, said in a statement.

“Our poorest families, like mine growing up, are having to make the tough choice between buying gas and groceries,” Scott added. “I have introduced legislation, and I have repeatedly asked the president and the Federal Reserve to take action. They haven’t done a thing to fix it. All we see from this administration is finger-pointing. Biden needs to take responsibility TODAY and get this crisis under control. Americans deserve better.”

Stocks tumbled following the release of Thursday’s report, with tech leading the broad market selloff. Meanwhile, treasury yield soared to record new highs, with the benchmark 10-year Treasury note touching 2%, its highest since August 2019.