WASHINGTON (AP) — A closely watched gauge of inflation in the United States rose by 5.8% last year, the sharpest jump since 1982, as brisk consumer spending collided with snarled supply chains, driving up the costs of food, furniture, appliances and other goods.
The Commerce Department report released Friday showed that consumer spending fell by 0.6% in December, as higher prices may have deterred some shoppers. Purchases of cars, electronics and clothing dropped last month. An Omicron wave also kept many Americans from traveling, dining out, or going to theaters and other entertainment venues. At the same time, incomes rose by 0.3% in the month, providing the fuel for future spending.
Inflation’s stubbornly high pace has strained family budgets, wiped out some of last year’s wage gains, and posed a serious political challenge for President Joe Biden and the Democrats in Congress. It also prompted the Federal Reserve to signal on Wednesday that it plans to raise interest rates several times this year beginning in March to try to curb the acceleration of prices.
Excluding the volatile categories of food and energy, the so-called core inflation rose by 4.9% last year, its largest gain since 1983.
The Fed chair, Jerome Powell, also made clear that the central bank will move to shrink its enormous bond holdings—totaling $8.9 trillion—shortly after it begins raising rates, another step that will likely tighten credit, slow spending, and possibly weaken the economy.
Speaking at a news conference on Wednesday, Powell acknowledged that inflation has edged higher “slightly” in the past month. He warned that higher prices “have now spread to a broader range of goods and services,” after initially affecting certain sectors of the economy, such as home goods manufactured in factories, which were the hardest hit by the pandemic.
Copyright 2022 The Associated Press. All rights reserved.
