By CHRISTOPHER RUGABER
AP Economics Writer
WASHINGTON (AP) — A worsening surge of inflation for such bedrock necessities as food, rent, autos and heating oil is setting Americans up for a financially difficult Thanksgiving and holiday shopping season.
Prices for U.S. consumers jumped 6.2 percent in October compared with a year earlier, leaving families facing their highest inflation rate since 1990, the Labor Department said Wednesday. From September to October, prices jumped 0.9 percent.
Inflation is eroding the strong gains in wages and salaries that have flowed to America’s workers in recent months, creating a political threat to the Biden administration and congressional Democrats and intensifying pressure on the Federal Reserve as it considers how fast to withdraw its efforts to boost the economy.
Fueling the spike in prices has been robust consumer demand, which has run into persistent supply shortages from COVID-related factory shutdowns in China, Vietnam and other overseas manufacturers. America’s employers, facing worker shortages, have also been handing out sizable pay raises, and many of them have raised prices to offset those higher labor costs.
The jump in inflation is hardly confined to the U.S. Prices have been accelerating in Europe and elsewhere, too, with annual inflation in the 19 countries that use the euro currency exceeding 4 percent in October, the most in 13 years, and energy prices spiking 23 percent. In Brazil, inflation soared more than 10 percent in the 12 months through October, according to data released this week. Higher prices for electricity, cooking gas, meat and other staples have plunged many Brazilians further into financial instability.
Americans are now spending 15 percent more on goods than before the pandemic. Ports, trucking companies and railroads can’t keep up, and the resulting bottlenecks are swelling prices. Surging inflation has broadened beyond pandemic-disrupted industries into the many services that Americans spend money on, notably for restaurant meals, rental apartments and medical services, which jumped 0.5 percent in October.
The accelerating price increases have fallen disproportionately on lower-earning households, which spend a significant portion of their incomes on food, rent, and gas. Food banks are struggling to assist the needy, with beef, egg and peanut butter prices jumping. Millions of households that are planning year-end travel, Thanksgiving dinners and holiday gift-giving will be forced to pay much more this year.
At the same time, the economy is managing to sustain its recovery from the pandemic recession, and consumers, on average, have plenty of money to spend. That is in contrast to the “stagflation” of the 1970s, when households endured the double hardship of high unemployment and high inflation.
Many Americans are also receiving healthy pay raises, especially workers at restaurants, hotels and entertainment venues, where hourly wages are up more than 10 percent from a year ago. And families, on average, have built up substantial savings from stimulus checks and enhanced unemployment benefits.
“We’re still looking at an economy in a strong position,” said Sarah House, a senior economist at Wells Fargo. “The consumer is still going out and spending, which is why we are seeing the price gains we’re seeing.”
Used car prices have rocketed more than 25 percent from a year ago. With automakers sharply slowing production because of parts shortages, prices for new cars have also risen for seven straight months. Furniture is more expensive. Grocery prices have climbed 5.4 percent in the past year, with the price of beef roasts leaping 25 percent. Bacon is up 20 percent.