An increasing rise in inflation for necessities like rent, food, vehicles, as well as heating oil is creating an extremely difficult Thanksgiving and Christmas shopping season for Americans, a report said.
Costs for U.S. consumers jumped 6.2 percent in October compared to the same month last year, which left families with the highest inflation rate since 1990, said the Labor Department on Wednesday. From September through October, prices increased by 0.9 percent.
Inflation is undermining the massive increases in wages and salaries that have been paid to American employees in recent months, posing an opportunity for political repercussions for both the Biden administration and the congressional Democrats and increasing tensions on Federal Reserve as it considers withdrawing its efforts to improve the economy.
The main reason for the hike in prices has been a strong consumer demand that has led to chronic shortages of supplies due to COVID-related factory shut-downs that have affected China, Vietnam, and other manufacturing facilities globally. American employers, confronted with a scarcity of employees, have been giving significant pay increases, and many of them have also increased their prices to cover the higher costs of labor.
The rise in prices is not limited only to the U.S. as prices are increasing in Europe and other countries, too as the average annual inflation rate of the nations using the euro currency reached four percent in October, which is the highest in the last 13 years, and prices for energy rising by 23 percent. In Brazil, the inflation rate soared to more than ten percent in the 12 months until October, as per data published this week. The rising cost of electricity and cooking gas, meat, and other essentials have pushed several Brazilians more into financial chaos.
Ports, trucking firms, and railroads cannot keep up with demand, and the bottlenecks have pushed up prices. Inflation has risen beyond the pandemic-disrupted sectors to the numerous services Americans purchase—including restaurant meals, rental apartments, and medical care, which increased by 0.5 percent in October.
While at the same time, the economy can maintain its growth after the pandemic recession as consumers, on average, have plenty of cash to spend. This is in stark contrast with the “stagflation” of the 1970s in which households faced the double burden that came with high unemployment and an extremely high inflation rate.
The cost of used cars has risen by more than 25 percent compared to one year ago. Automakers are slugging production due to shortages of parts, and the prices for new vehicles, have increased for the past seven months.
Republicans in Congress have blamed President Biden’s $1.9 trillion budget for financial aid, approved in March, for accelerating the rate of inflation. According to them, additional stimulus checks and enhanced unemployment assistance caused a surge in demand that was greater than the amount that the economy is capable of producing.
This week, Biden was at the Port of Baltimore to promote the various components of the recently approved infrastructure package, which will increase capacity at ports and, as the administration claims, ease congestion and eventually reduce inflation.
The cost of energy has risen four point eight percent from September to October, with gas, natural gas, and heating oil rising because for the same reason that many other commodities have become more expensive. Demand has grown because Americans fly and drive more. However, supplies haven’t kept up. A gallon of gasoline, on average, cost $3.42 all across the nation on Tuesday, according to AAA, up from $2.11 the previous year. The Energy Information Administration has predicted that Americans would spend 30 percent higher this winter for natural gas and 43 percent greater on heating oil.
However, economists expect inflation to ease when supply bottlenecks are sloughed off, and Americans shift more of their spending back to pre-pandemic standards. Consumers should spend more money on entertainment, travel, and other services and less on items like furniture, cars, and appliances. This will ease the stress on supply chains, the report said.