The PCE price index, the Federal Reserve's preferred inflation gauge, hit its highest level in nearly four decades in November, reinforcing the persistence of inflationary pressures.
The Commerce Department reported that the PCE price index rose by 5.7 percent in the 12 months through November. The October inflation rate was 5.1 percent, which was the highest since 1990, and nearly three times higher than the Fed's inflation target of 2 percent. It is the highest level since July 1982, when PCE inflation hit 5.8 percent.
The core PCE price index, which excludes the volatile categories of food and energy, rose in the year through November at a rate the Fed relies on most heavily. October's over-the-year rate was 4.2 percent, slightly higher than forecasts of 4.5 percent. It is the fastest pace since 1989.
The core PCE measure reflects inflationary pressures, which some economists warn could intensify further. Ian Shepherdson, chief economist at Pantheon Macroeconomics, said in a note that he expects core PCE inflation to rise before peaking in February.
The third-quarter PCE inflation came in at 5.3 percent, and the consumer price index (CPI) measure rose in the year through November at 6.8 percent, with the latter gauge surging to its highest level in
Bankrate's Chief Financial analyst Greg McBride told The Epoch Times that rising inflation was dragging down consumer confidence. It is only a matter of time before it affects consumer spending in a material way, he predicted. Consumer spending makes up two-thirds of the US economy.
Richard Curtin, director of the University of Michigan's closely watched Consumer Sentiment Index, said that worries about inflation recently outpaced concerns about the jobs situation.
When asked if inflation or unemployment was the more serious problem facing the nation, 76 percent chose inflation, while 21 percent chose unemployment, according to a statement from the Michigan University.
Consumer confidence rose slightly in December from the prior month, as concerns about inflation decreased from November when they hit a 13-year high, according to a separate sentiment gauge. Inflation and a possible rise in COVID-19 infections are likely to be drags on consumer confidence and spending going forward.
Lynn Franco, senior director of economic indicators at The Conference Board, said in a statement that both confidence and consumer spending will face challenges from rising prices and an expected winter surge of the Pandemic.
Two-thirds of US adults don't expect their finances to improve in the next five years, with more than half of them blaming inflation, according to Bankrate's December Financial Security Index.
The Fed is speeding up the pace of scaling back its monetary policy because of high prices and signs of continued labor market strength.
President Joe Biden has become a victim of inflation. The most popular answer to the question of what is driving higher prices was Biden administration policies.
In remarks at the White House on Tuesday, Biden acknowledged the impact of inflation on Americans.
It is a devastating thing for people who are working class and middle class. It hurts, Biden said, while repeating his view that Congress would help tame runaway prices.
By Tom Ozimek
Tom Ozimek has experience in journalism, deposit insurance, marketing and communications. Roy Peter Clark's best writing advice is to hit your target and leave the best for last.
