Record High Inflation Could Put Us All In The Poor House

The price of consumer goods has risen at the fastest annual pace in over 30 years as supply chain backups and materials shortages continue and gasoline prices surged. The consumer price index climbed 6.2% year over year in October, the Labor Department said. The increase marked the largest annual gain since November 1990. Prices rose 0.9% month over month.

Analysts surveyed by Refinitiv were anticipating prices to rise 0.6% in October and 5.8% annually.

"Inflation is broadening out," said Greg McBride, chief financial analyst at Bankrate. "In addition to food, energy, and shelter continuing to post outsized monthly increases, new and used car prices are once again shifting into overdrive."

Energy prices surged 4.8% last month and were up 30% over the past year. The October increase was largely attributed to a 6.1% rise in the cost of gasoline. Food prices have also gone up 0.9% last month as the food at home category saw a 1% increase. All food prices are up 5.3% year over year.

Core prices, which exclude food and energy, increased 0.6% month over month and 4.6% over the past 12 months. Economists were anticipating respective increases of 0.4% and 4.3%.

Adding to the rise were new and used vehicle prices, which climbed in October 1.4% and 2.5%, respectively. Prices for new vehicles were 9.8% above one year ago while used vehicle prices were up 26.4% from October 2020.

The cost of shelter climbed 0.5% last month and was 3.5% above a year ago.

"We’re seeing early signs of an inflationary surge that’s likely to persist, with companies responding to rising input costs with cost increases of their own, which in turn causes higher input costs for others," said Brad Armstrong, partner at Lovell Minnick Partners. "It’s a cycle that repeats itself."

Wednesday's report caught the attention of the Federal Reserve, which earlier this month announced plans to taper its $120 billion per month in asset purchases while taking notice of "elevated" inflation. The central bank still expects inflation to be "transitory."

Later this month the Fed will begin scaling back its purchases of Treasurys and mortgage-backed securities by $15 billion a month, which puts its asset-purchase program on pace to end in June. Markets are currently pricing in the first-rate hike to occur in July 2022.

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