US inflation hits its highest level in nearly 40 years, testing Biden

The month-on-month consumer price inflation rate in the United States also decelerated slightly to 0.8 percent, but it was higher than expected nonetheless. Photo: AFP


The month-on-month consumer price inflation rate in the United States also decelerated slightly to 0.8 percent, but it was higher than expected nonetheless. Photo: AFP

Consumer prices in the United States rose last month at a rate not seen in nearly 40 years, the government reported on Friday, stressing how inflation threatens the world’s largest economy and the public support of the world. President Joe Biden.

The Department of Labor’s Consumer Price Index (CPI) jumped 6.8% from November last year, its biggest gain since June 1982 as prices for gasoline, cars and second hand, rents, food and other goods continued to climb.

While the report contained signs that the inflation wave could peak, it nonetheless constitutes a political handicap for the president, with the Republican opposition using it to argue against his economic policies.

Biden countered that the report did not include recent declines in energy and used car prices – two main drivers of the high inflation figures seen this year – and that the supply chain issues that have price hikes are being resolved.

“Today’s numbers reflect the pressures economies around the world are facing as we come out of a global pandemic – prices are rising,” Biden said in a statement.

He added that “the increase in prices and costs is slowing down, but not as quickly as we would like”, but later admitted that inflation was “a real obstacle in the road”.

Senior Senate Republican Mitch McConnell blamed the White House for the price spikes, saying the data “confirms what every American family already knows: Inflation is out of control under Democrat watch.”

Gasoline prices rose 6.1% last month, while used car prices climbed 2.5%, according to the CPI report.

However, these were the same increases as in October. The month-over-month consumer price inflation rate also decelerated slightly to 0.8%, but was still higher than expected.

Biden made tackling inflation a top priority last month after the CPI in October saw its biggest annual increase since 1990.

It surprised analysts and gave Republicans ammunition to use against Biden’s historic Build Back Better plan, which would spend $ 1.8 trillion to improve social services and tackle climate change, but faces a road difficult in Congress, which its Democrats control with a narrow margin.

Various factors have caused prices to rise, including component and labor shortages, strong demand for goods, and rebounds in industries that have been disrupted by the Covid-19 pandemic but are now recovering in using vaccines.

The extent to which Biden deserves to be blamed for the rise in inflation is the subject of debate.

Mickey Levy, chief economist covering the Americas and Asia at Berenberg Capital Markets, pointed to supply bottlenecks, the Federal Reserve’s low interest rate policies, and recovery legislation in the event of a pandemic promulgated under Biden and his Republican predecessor Donald Trump.

“The Biden administration fears the negative political fallout from the impact of higher inflation on households and tries to shift the blame onto special factors,” Levy said.

The White House has argued that its actions helped put the country back on its feet after last year’s economic collapse, citing a steady decline in the unemployment rate and in the number of people seeking unemployment assistance.

Some of the high inflation readings are due to rising prices for commodities like oil, which turned negative last year at the low of the recession, but increased with the recovery in global demand in 2021.

This has pushed gas prices higher in the United States, but they have started to retreat in recent weeks.

Economist Joel Naroff said the data confirmed that policymakers in Washington misinterpreted the persistence of soaring prices that accompanied the reopening of the economy due to vaccines, and although inflation may decline in the months to come, Americans are in real pain now.

“When we can say that inflation has been at its highest for nearly forty years, we know that things have turned badly,” he wrote in an analysis. “I really hope the transient arrives soon and lasts long enough, as inflation is starting to become a concern.”

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