Inflation surged to a 40-year high of 7.5% in January

How do you feel about the rise in consumer prices?

Written by Eric Revell, Countable News

The Bureau of Labor Statistics reported Thursday that the all items consumer price index rose by 7.5% over the last 12 months through January. That’s the highest rate of inflation since a comparable period ending in February 1982 and more than three times the Federal Reserve’s target rate of 2%.
Month-to-month consumer prices rose by 0.6% in January on a seasonally adjusted basis. That’s up slightly from the 0.5% rate measured in December but down relative to the 0.8% rate measured in November.

Here’s a rundown of the common items which have seen the largest increase in inflation year-over-year (notable monthly changes in parentheses):
Fuel oil prices increased 46.5% over the last 12 months.
Used cars and trucks increased 40.5%.
Gasoline prices for all types of gas increased 40%.
Utility gas service (piped) increased 23.9%.
Propane, kerosene, and firewood increased 22.6%.
Lodging away from home increased 20.5%.
Furniture and bedding increased 17%.
Beef and veal increased 16%.
Pork increased 14.1%.
Electricity increased 10.7%.
Tools, hardware, outdoor equipment, and supplies increased 10.7%.
Citrus fruits increased 10.6%.
Chicken increased 10.3%.
Fish and seafood increased 9.6%.
Infants’ and toddlers’ apparel increased 8.8%.
Coffee increased 8.6%.
Fresh fruits increased 8.2%.
Cereals and bakery products increased 6.8%.
Milk increased 6.8%.
Men’s apparel increased 6.6%.
Frozen fruits and vegetables increased 5.5%.
Women’s apparel increased 5.4%.

Inflation is a measure of the decline of purchasing power for a given currency over time, which in the U.S. means that a dollar effectively buys less than it did in prior periods because prices rise.
The most common way inflation is measured is through the Consumer Price Index for Urban Consumers (CPI-U), which shows changes in prices paid for a “representative basket of goods and services” by an urban consumer group representing about 93% of the U.S. population.
CPI-U includes food, energy, commodities like cars and clothes, plus services such as rent and healthcare; and the relative importance of each to the overall basket shifts according to its proportion of all spending in a given month. This overall number is known as “headline” CPI, although economists also track a metric called “core” CPI which excludes food and energy because those categories tend to have more volatility.
The Federal Reserve aims to keep inflation at about 2% as part of its dual mandate of promoting stable prices and full employment, as a modest amount of inflation is viewed as an optimum policy in terms of encouraging consumer spending without penalizing savings and investment. When inflation starts to get out of control, the Fed raises interest rates to encourage more savings and less consumer spending.

(Photo Credit: iStock.com / sefa ozel)

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