Higher U.S. Inflation Rate To Persist Into Late Months Of 2022

The US consumer-price index increased by 6.8% in November compared with a year earlier, according to figures released, the fastest pace since 1982, The Economist noted.

Photo Insert: A deflating forecast for US consumers

“If these headlines about inflation highs seem like clockwork in America, that is because, to a significant extent, they now are. Such are the basic mathematics of year-on-year price trends. The surge in inflation since the start of 2021 means that it is guaranteed to remain elevated in annual terms for a while to come. A relatively optimistic forecast would have inflation returning to its pre-pandemic norm only at the very end of 2022,” it added.

To understand why, consider the underlying numbers. In 2019, the year before COVID-19 emerged, the average month-on-month increase in consumer prices in the US was 0.2%. That was marginally lower over the course of 2020 when activity briefly shuddered to a halt and then roared back to life.

But in 2021, as the recovery gained altitude, prices shot up by an average of 0.6% month-on-month. That surge is now making its impact felt on annual price comparisons.

Imagine, for instance, that the consumer-price index in November remained at the exact same level as in October (or put differently, that there had been zero month-on-month inflation). Even then, the year-on-year increase in November would have reached 6.3%, the fastest pace since 1990. In fact, the additional month-on-month gain, of 0.5% (before seasonal adjustment), propelled it higher still.

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