Consumer Prices Rose Again In December 2021

Inflation closed out 2021 on a high note, bad news for the Biden White House and for economic policymakers as rapid price gains erode consumer confidence and cast a shadow of uncertainty over the economy’s future, Jeanna Smialek reported for the New York Times.

Photo Insert: Wednesday’s fresh data showed that the cost of used cars, shelter, and food are all increasing quickly.

The Consumer Price Index (CPI) climbed by 7 percent in the year through December, and by 5.5 percent after stripping out volatile prices such as food and fuel. The last time the main inflation index eclipsed 7 percent was in 1982.

Policymakers have spent months waiting for inflation to fade, hoping supply chain problems might ease, allowing companies to catch up with booming consumer demand.

Instead, continued waves of the virus have locked down factories, and shipping routes have struggled to work through extended backlogs as consumers continue to buy goods from overseas at a rapid clip. What will happen next might be the biggest economic policy question of 2022.

Wednesday’s fresh data showed that the cost of used cars, shelter, and food are all increasing quickly. Prices for used cars and trucks have been a big driver of recent inflation. Auto manufacturers have been struggling to get their hands on parts — particularly computer chips imported from Asia — delaying production of new vehicles and pushing up demand for a finite supply of used ones.

Recent lockdowns in China meant to contain the coronavirus could exacerbate the shortage. When it comes to vehicle prices, “it’s not over yet,” said Jim O’Sullivan, chief U.S. macro strategist at T.D. Securities, said before the report.

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