Inflation Swells 6.8% to Largest Increase Since 1982
After rising to 6.2% in October, the consumer price index (CPI) continued to climb into November with a 6.8% year-over-year increase. This represents the largest 12-month increase since June 1982. Fed officials pointed to strong consumer demand for goods and supply chain bottlenecks as significant factors driving inflation even higher than October.
Rising consumer prices
Energy prices have climbed 33.3% compared to November 2020, with gasoline alone up 58.1%, and food prices are showing a 6.1% rise year over year. The volatility of food and energy prices accounts for a significant portion of the CPI increase:
- CPI rose 0.8% month over month.
- Excluding food and energy, the so-called "core" CPI still rose 0.5% for the month.
Producer prices soar
November saw the producer price index (PPI) leap to 9.6% compared to November 2020, representing the largest PPI increase since November 2010. The PPI generally reflects supply conditions in the market, and such a stark increase could be an indication of continued consumer price inflation. As the supply chain bottlenecks ease and holiday shopping dies down, producers could have time to adjust their capacities and more readily meet consumer demand.
Reactions to November inflation
Markets responded positively to the CPI report, with the S&P 500 rising 0.95% to a record close on Friday. The Nasdaq Composite increased 0.7% and the Dow Jones Industrial Average rose 0.6%.
Given the inflation growth and trends, economists are predicting an even more accelerated tapering by the Fed, potentially ceasing bond purchases entirely by March 2022. Yesterday, the Fed announced a reduction in asset purchases that's twice the taper forecasted last month.
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