Inflation reaches 40-year high: January CPI posts 7.5% annual gain

[mahatmakanejeeves]

Source: Yahoo! Finance

Yahoo Finance

Inflation reaches 40-year high: January CPI posts 7.5% annual gain
{edited from the original title, "January CPI preview: Inflation reaches fresh 39-year high"}

Emily McCormick · Reporter
Thu, February 10, 2022, 8:31 AM

U.S. inflation accelerated in January, with prices across a wide range of goods and services soaring further amid lingering shortages and supply chain disruptions.

The Consumer Price Index (CPI) released by the Bureau of Labor Statistics Thursday morning registered a 7.5% annual gain in January. Consensus economists were looking for a 7.3% rise, according to Bloomberg data. This represented the fastest rise since 1982, as well as an acceleration from the 7.0% year-over-year increase seen in December. ... On a month-over-month basis, consumer price increased by 0.6%, matching the rate seen at the end of 2021.

Heading into Thursday's report, contributions to the headline jump in inflation were expected to be broad-based, reflecting widespread price pressures still reverberating across the recovering economy.

Energy prices have been a key contributor to the overall CPI and were up by more than 29% on a year-over-year basis in December, even as prices pulled back slightly compared to November. Natural gas prices jumped by a record in January and crude oil prices topped $90 per barrel for the first time since 2014, suggesting further contributions from the energy index to the January CPI. ... And even excluding more volatile food and energy prices, the so-called core CPI rose by 6.0% in January over last year, also marking the biggest jump since 1982. The core CPI had risen by 5.5% in December.

{snip}

Read more: https://finance.yahoo.com/news/consumer-price-index-cpi-inflation-january-2022-210344769.html

---

Here are this morning's banner and yesterday afternoon's placeholder article:

COMING UP January CPI preview: Inflation likely to reach fresh 39-year high
Check back for results 8:30 a.m. ET
-- -- -- -- -- --

Yahoo Finance

January CPI preview: Inflation likely to reach fresh 39-year high

https://finance.yahoo.com/news/consumer-price-index-cpi-inflation-january-2022-210344769.html

Emily McCormick·Reporter
Wed, February 9, 2022, 4:03 PM · 4 min read

U.S. inflation likely accelerated in January, with prices across a wide range of goods and services soaring further amid lingering shortages and supply chain disruptions.

The Consumer Price Index (CPI) released by the Bureau of Labor Statistics Thursday morning is expected to register a 7.2% annual gain in January, according to Bloomberg consensus data. This would represent the fastest rise since 1982, as well as an acceleration from the 7.0% year-over-year increase seen in December. On a month-over-month basis, however, consumer price increases likely slowed slightly to a 0.4% rise, compared to the 0.6% monthly jump seen at the end of 2021.

{snip}

Energy prices have been a key contributor to the overall CPI and were up by more than 29% on a year-over-year basis in December, even as prices pulled back slightly compared to November. Natural gas prices jumped by a record in January and crude oil prices topped $90 per barrel for the first time since 2014, suggesting further contributions from the energy index to the January CPI.

{snip}

And even excluding more volatile food and energy prices, the so-called core CPI is expected to rise by 5.9% in January over last year, also marking the biggest jump since 1982. The core CPI rose 5.5% in December.

{snip}

[progree]

1. The title with "Preview" is confusing, it has been removed from the source

Last edited Thu Feb 10, 2022, 06:39 PM - Edit history (1)

https://finance.yahoo.com/news/consumer-price-index-cpi-inflation-january-2022-210344769.html

"January CPI: Inflation reaches fresh 40-year high"

Note also 40-year high, not 39-year high.
Thanks

BLS CPI report: https://www.bls.gov/news.release/cpi.nr0.htm
BLS CPI data series, monthly changes: https://data.bls.gov/timeseries/CUSR0000SA0?output_view=pct_1mth
CPI index levels: https://data.bls.gov/timeseries/CUSR0000SA0

CPI Calculator at: https://www.bls.gov/data/inflation_calculator.htm

Food at home, BLS data series: https://data.bls.gov/timeseries/CUSR0000SAF11

Grocery prices (food at home) inflation compared to overall inflation rate
. . . . . https://www.in2013dollars.com/Food-at-home/price-inflation
. . . . . . . . From 1947 to 2021 and from 2000 to 2021, food at home inflation very slightly lagged the overall inflation rate
. . . . . https://www.democraticunderground.com/10142735789

Edited to Add
Real (meaning inflation adjusted) average hourly earnings of production and non-supervisory workers:
https://data.bls.gov/timeseries/CES0500000032
In 1982-1984 dollars:
January 2021: 9.84,   January 2022: 9.71,   down 1.3%
So much for greedy workers driving up inflation -- they are just trying to keep up with inflation, and not succeeding.

In regular ordinary dollars, i.e. not inflation adjusted:
https://data.bls.gov/timeseries/CES0500000008

[mahatmakanejeeves]

7. Thanks. Yahoo! Finance and I were both multitasking this morning.

Emily McCormick got the CPI story, while Alexandra Semenova got to write about another 223,000 individuals filing new claims last week.

And good morning.

[oldsoftie]

2. Need to get a handle on this in the next 6 months.

Pressure the Saudis to open the spigot a little more.
SLOWLY raise interest rates

[Calista241]

14. It's likely not going to be slow.

Fed watchers are predicting interest rates are going up 5 or 6 times in 2022, starting in March. The first one will also probably be a .5% increase. That's some major brakes. Going to be interesting when interest rates are upwards of 6% or 7% by this time next year. I just hope it's not even higher.

[oldsoftie]

24. That would be a TERRIBLE mistake IMO.

We have a whole generation of people who have never seen interest rates that high. And they're in the home buying years. Shocking them with a rate that high would depress the market too much. And in the past, the Fed has almost ALWAYS over reacted either cutting too much or raising to fast. NO WAY should they raise SIX times in this year alone. Especially if the 1st one is 1/2 a point. Do the 1/2, see how the markets react and then decide the next one. A lot of this inflation is due to shortages; which at SOME point have to smooth out. And gas prices aren't going to react to rate increases; it'll react to supply increases. And THAT could be focused on right now.

All of that is just my opinion. Except for the gas prices; that's pretty obvious.

[Calista241]

25. If Russia invades Ukraine, the price of oil is going to skyrocket.

analysts are saying it could go to $120 / barrel.

[oldsoftie]

29. The Saudis could mitigate that. We should ENCOURAGE THEM.

I would hope that they wouldn't want the Russians to profit from invading anymore than we would

[hamsterjill]

22. Yep.

There go the midterms. Uh oh!!! I’m being negative!!!

[IronLionZion]

3. The Fed sure is taking their sweet time on this

I was hoping inflation would come down before November

[Calista241]

6. They've got to unwind their asset purchases before they can start raising rates.

They've already stated that purchases will end in March, and they can begin to raise rates after that. If they could cut off the purchases in one fell swoop, they probably would, but they can't really do both at the same time.

People expect the Fed to raise rates 5 or 6 times this year, and that's going to bring its own problems. For a population that's used to very, very low interest rates, this may be almost as unpopular as inflation. Keep in mind that for a period of time, we'll have both high inflation and higher interest rates.

[nitpicker]

4. I think it would be worse if they included food

A year ago, a box of store-brand granola was $1.89, now it's $2.29.

Specials on albacore tuna cans used to be $1, now it's 4/$5.

etc. etc. etc.

[former9thward]

8. They are also reducing quanity size.

Changing a box of something from 12 oz to 10 oz, etc.

[progree]

10. The people who gather food prices look at the label and actually weigh the contents /nt

[former9thward]

18. And???

The point is that it is hidden inflation from the consumer. If someone is used to buying a box of X which has been 12 oz for $1.50 they may not notice it is now 10 oz. but still $1.50.

[progree]

21. True. But some people think the CPI surveyors just look at the price of a medium can of

Last edited Thu Feb 10, 2022, 06:23 PM - Edit history (2)

XYZ coffee (for example), without looking at the exact weight (or weighing it). I've seen some comments on past CPI threads where people think the CPI isn't factoring in shrinking package sizes (I know your comment didn't say that).

Of course, package sizes can't shrink forever, they will then roll out some new big "economy" size one and then the cycle begins again

Edited to add: or a new size with "6 extra ounces" (and priced accordingly)

[progree]

9. The headline CPI number includes food, the "core" CPI number doesn't

Food is part of the 7.5% number
BLS CPI report: https://www.bls.gov/news.release/cpi.nr0.htm

[George II]

11. I sometimes get confused with numbers like this. I'm guessing this is year to year (i.e., 2021-2022)

Christine Romans just said on CNN that it's year to year.

If that's the case, this isn't nearly as alarming as it seems. We have to remember that 2020 and early 2021 were virtually flat, so what we're now seeing is prices "catching up".

I'd love to see an average over the last two years with January thrown in. I suspect the "real" increases are much lower.

One of the things CNN reported on was gas prices up 40% "over this time last year", and then they said electricity was up 10% in the same period.

No mention that electricity prices are VERY dependent upon the price of petroleum.

I'm glad to see your second paragraph, which is a lot more realistic than the media's panicky "Inflation reaches 40-year high"! Inflation is a comparative number, if prices go down and then go up a little more than the previous benchmark where it went "down", it's going to look like a HUGE increase, but it isn't.

It's like a so-called "esteemed" economist said earlier this week - the compensation of Starbucks' CEO went up $20-something million in 2021 over 2020, but neglected to say 2020 was DOWN $20-something from 2019. That's a lot of money anyway, but still over 2019-2021 it was virtually stagnant, not the hysterical "UP $20 MILLION!!!"

[progree]

13. Last 2 years: 4.40%/year. Last 3 years: 3.75%/year

I'd love to see an average over the last two years with January thrown in. I suspect the "real" increases are much lower.

BLS CPI index levels: https://data.bls.gov/timeseries/CUSR0000SA0

Year January February March etc. etc.
2019 252.470 253.135 254.273 255.163 255.325 255.361 255.900 256.179 256.596 257.305 257.788 258.263
2020 258.682 259.007 258.165 256.094 255.944 257.217 258.543 259.580 260.190 260.352 260.721 261.564
2021 262.200 263.346 265.028 266.727 268.599 270.955 272.184 273.092 274.214 276.590 278.524 280.126
2022 281.933

3 years: January 2022 over January 2019: +11.670% (3.75% annualized)
2 years: January 2022 over January 2020: +8.988% (4.40% annualized)
1 year: 7.526%

From the OP:

The Consumer Price Index (CPI) released by the Bureau of Labor Statistics Thursday morning registered a 7.5% annual gain in January.

Also "7.5% annual gain" in the latest title

On electricity - very little is generated from petroleum, but a lot is from natural gas.

[George II]

15. Thanks. That confirms my unofficial theory. So overall President Biden isn't doing....

....much differently than tfg, in fact considering the mess he inherited he's doing very well.

As for your second point, I didn't realize petroleum use had dropped that much. So I went searching, here's what I found:

Fossil fuels (combined) - 60.6%
Natural Gas - 40.5%
Coal - 19.3%
Petroleum - 0.4%!

I'm also surprised that the coal component is still as large as 20%.

https://www.eia.gov/tools/faqs/faq.php?id=427&t=6

[progree]

16. I think coal-fired generation actually increased this year, both in absolute KWH terms and as a

share of total generation -- because of soaring natural gas prices, so they put on, relatively speaking, more coal-fired generation and less natgas generation than otherwise. And when the plants are online, they compete -- their generation levels are determined by equal incremental loading (search: economic dispatch).

At least that's something I think I read recently (the part about more coal being burned this year for electric generation. As for unit commitment and economic dispatch, that used to be my job for many years at NSP / Xcel Energy).

From your link:

About 61% of this electricity generation was from fossil fuels—coal, natural gas, petroleum, and other gases. About 20% was from nuclear energy, and about 20% was from renewable energy sources.

Interesting that coal, nuclear, and renewable are at about the same level (20% each, well the coal is 19.3% from the link and your #15)

[George II]

17. I wish we weren't so terrified of nuclear power. It's MUCH more efficient, clean, inexpensive...

...and SAFE.

Early in my career I designed valves and other components that went into nuclear power plants, particularly the pressure vessel (area that is most critical)

We had to document every ounce of material and minute of labor that went into our valves - from the mine to final assembly. The paperwork sometimes was as heavy as the valves themselves.

Plus, the pressure vessels were designed to withstand being hit by a locomotive at 65 MPH.

[progree]

23. Unfortunately, the other side will compare 2020's (Trump's) inflation rate to 2021 (Biden's)

and yammer on endlessly about how back in the good ol' Trump days, inflation was low, blah blah,

without mentioning the GDP growth rates:

2020: -3.4%, (yes, negative 3.4%)
2021: +5.7%

https://www.bea.gov/news/2022/gross-domestic-product-fourth-quarter-and-year-2021-advance-estimate

Real GDP increased 5.7 percent in 2021 (from the 2020 annual level to the 2021 annual level), in contrast to a decrease of 3.4 percent in 2020 (table 1).

[Midnight Writer]

12. CNBC nails it again! "The big problem is higher wages and people not showing up for work."

Nothing about record profits for energy companies and food producers, the two largest inflation contributors.

They had a guy on from Tyson foods just giddy over their huge profits.

[IronLionZion]

27. Yup wages are way too inflated and people are too lazy to work

Sure could use some trickle down but I guess that's never going to happen.

[andym]

19. History: 40 years ago in 1982, many thought Reagan was very vulnerable

because of high inflation and high interest rates. Reagan's approval was flagging. It was only after the Fed Chairman Paul Volcker's strong medicine began to work: raising interest rates and tightening the money supply, that inflation was tamed and Reagan could proclaim "his" economic miracle Thing is that Jimmy Carter appointed Volcker in 1979, knowing it would cause short-term pain and hurt his reelection chances, in return for potentially curing stagflation. Jimmy Carter should get the credit.

[peppertree]

28. +1

For that, and for popping the OPEC price bubble.

The Reagan recovery would have never happened - or only much later - had it not been for those two Carter accomplishments.

[mahatmakanejeeves]

20. As you read today's inflation report, pay close attention to what the CEOs who set prices are saying

Last edited Thu Feb 10, 2022, 07:14 PM - Edit history (3)

I'm posting the tweet as an FYI. I don't necessarily agree with what the author of the linked tweets says.

David Weigel Retweeted

As you read today's inflation report, pay close attention to what the CEOs who set prices are saying. We got our hands on the latest batch of earnings reports, and it's a doozy. They're literally bragging about hiking prices while hiding behind "inflation." The receipts...(1/7)

Link to tweet

[h2ebits]

26. Here is the truth. . . .

thank you for posting and we need to spread this truth wide and long about what is causing this "inflation." The oligarchs and big corporations are working hard to take down our country--all of us.

And please let us remember that the stock market is NOT the economy--we the people are. Raising interest rates will actually help all of the savers who don't "invest" . . . .er, um. . . .gamble in the stock market.

[Emile]

30. Listen to the Predatory Capitalist and they'll blame the hourly workers

because their wages are starting to climb, it's never their fault!

[cstanleytech]

31. This why I have said that the large corporations should be taxed by a method that

takes into account the number of employees that earn less than 250% over the federal poverty level.
Set their tax rate at 90% and the more employees they have that earn over that then the lower their taxes and temps as well as contract workers count as employees.
Also the poverty rate should not in any way be set by the House, Senate or President but rather by the Inspector General’s office and it has to be adjusted every 5 years.

[progree]

32. "Another": As for "soaring" wages driving up inflation: down 1.3% on inflation-adjusted basis

Real (meaning inflation adjusted) average hourly earnings of production and non-supervisory workers:
https://data.bls.gov/timeseries/CES0500000032
In 1982-1984 dollars:
January 2021: 9.84,   January 2022: 9.71,   down 1.3%
So much for greedy workers driving up inflation -- they are just trying to keep up with inflation, and not succeeding
For every $100 in their "fat" paychecks, they have lost $1.30 in purchasing power.

In regular ordinary dollars, i.e. not inflation adjusted:
https://data.bls.gov/timeseries/CES0500000008

[BlueIdaho]

33. The real issue is corporate greed

Not someone making an extra $3/hour flipping burgers. The government pumped covid money into the economy and so what did the corporations do in response? They jacked up prices and then blamed the supply chain, worker salaries, and anything else they could think of for rising interest rates. All the while they are fleecing consumers and lighting their cigars with fifty dollar bills.