Consumer prices rose 0.8 percent in February and 7.9 percent over the last 12 months, according to data released Thursday by the Labor Department.
The Labor Department’s consumer price index (CPI), a key gauge of inflation, showed price growth speeding up on both monthly and annual basis. Rising prices for gasoline, housing and food drove most of February’s inflation spike, the department said.
Economists expected prices to rise roughly 7.9 percent on an annual basis and 0.6 percent between January and February. Annual inflation jumped to the highest rate since 1982 in February and monthly inflation rose for the first month since October 2021.
Rising prices for food, energy, shelter and a wide range of consumer goods have squeezed household budgets amid an otherwise strong recovery from the COVID-19 pandemic.
A combination of labor shortages, supply chain disruptions and the swiftness of the economic recovery has fueled rapid price increases for essential goods as unemployment plunges close to pre-pandemic levels.
Grocery prices rose 1.4 percent in February alone and are up 8.6 percent on the year — the fastest annual increase since April 1981. Energy prices rose 3.5 percent last month, led by a 6.6-percent monthly increase in gasoline prices and a 7.7 percent increase in fuel oil prices.
Without food and energy prices, which are historically more volatile, the CPI rose 0.5 percent in February and 6.4 percent on the year.
The Federal Reserve is on track to hike interest rates next week as inflation steams well above the bank’s annual target. Fed Chairman Jerome Powell expressed confidence last week the bank would be able to raise rates and cool off inflation without denting a strong labor market.
But the war in Ukraine has raised new challenges for the Fed and other policymakers as they grapple with inflation. While prices for energy and food have risen since the invasion, a decline in global economic activity could also ease pressure on prices.
Even with the war’s unknown implications for inflation, rising prices are a growing political problem for President Biden and Democrats ahead of the midterm elections. Voter approval with Biden’s handling of the economy has fallen steadily amid increasing inflation, even after the U.S. economy added 6.5 million jobs last year, grew 5.7 percent in 2021, and powered consumer spending above pre-pandemic levels.
“Skyrocketing inflation has compounded the difficulty to hire and retain workers amid a labor crisis. Record high energy prices have led to soaring overhead and shipping costs. America’s small businesses are struggling to stock their shelves and the Democrats only care about pushing their socialist wish-list agenda,” said Rep. Blaine Luetkemeyer (Mo.), ranking Republican on the House Small Business Committee, in a Thursday statement.
Republicans have blamed high inflation on the $1.9 trillion economic relief bill signed by Biden roughly a year ago. While some economists say the stimulus checks included in the package likely helped drive inflation higher, it was only one of several factors fueling higher prices.
Consumer spending rebounded last year far quicker than the factories, suppliers, retailers and shippers needed to satisfy a glut of spending. Supply shortages, hiring issues and successive waves of COVID-19 have upended supply chains, pushed prices higher and led to rapid wage growth.
Biden and Democrats have called high inflation a side effect of a surprisingly strong economic recovery, but have expressed deep concern about the rising cost of living. The president and most in his party have pitched the $1.75 trillion Build Back Better plan as way to reduce prices, particularly through investments in affordable housing, child care, and lower drug costs.
Even so, the bill is stalled in the Senate amid pushback from moderates such as Sen. Joe Manchin (D-W.Va.), who has objected to spending more money amid high inflation.
–Updated at 9:30 a.m.