SPRINGFIELD, Mo. – Inflation jumped at its fastest pace in nearly 40 years last month, a 7% spike from a year earlier that is increasing household expenses, eating into wage gains, and heaping pressure on President Joe Biden and the Federal Reserve to address what has become the biggest threat to the U.S. economy.
The United States hasn’t seen anything like it since the early 1980s.
Prices rose sharply in 2021 for cars, gas, food, and furniture as part of a rapid recovery from the pandemic recession. Vast infusions of government aid and ultra-low interest rates helped spur demand for goods, while vaccinations gave people the confidence to dine out and travel.
Springfield shoppers say they are feeling the pinch all around them, from the gas station to the grocery store.
“Everything’s high…food, gas. It goes up $0.20 at a time and takes forever to go back down pennies at a time,” says Springfield resident Charles Hobbs as he filled up his tank Thursday. “[There’s also] a lot of things you can’t find…and empty shelves.”
As Americans ramped up spending, supply chains remained squeezed by shortages of workers and raw materials, and this magnified price pressures.
The Labor Department reported Wednesday that a measure of inflation that excludes volatile food and gas prices jumped 5.5% in December, also the highest in decades.
Price gains could slow further as snags in supply chains ease, but most economists say inflation won’t fall back to pre-pandemic levels anytime soon.
Companies large and small are adapting as best they can.
Owners of Consumers Hardware in Springfield say they are having problems keeping certain items like paint and adhesives in stock, while also facing higher prices on weekly orders. “We can’t get supply in and then when we do get it in, increased prices are pretty much across the board on every product that we’re getting,” says owner Joe Losh.
Losh says orders are consistently costing more and deliveries are often delayed.”We’re a small business, and unfortunately, we have to pass it on to survive,” he tells OzarksFirst on Thursday. Losh says many small businesses are also having to raise prices after recently raising employee wages. According to Losh, the only silver lining is that price hikes and supply chain issues are affecting his big-box competitors too.”We’re hearing from our customers that it’s everywhere. It doesn’t matter where they go. We’re just pretty much in the same boat with everybody else.”
Businesses struggling to hire have hiked pay, but rising prices for goods and services have eroded those income gains for many Americans. Lower-income families have felt it the most, and polls show that inflation has started displacing even the coronavirus as a public concern.
The biggest driver of inflation, according to economists, is mismatches between supply and demand. Used car prices have soared more than 37% over the past year because a shortage of semiconductors has prevented auto companies from making enough new cars. Supply-chain constraints have driven furniture prices nearly 14% higher over the past year.
Inflation could ease as the omicron wave fades and as Americans shift more of their spending to services such as travel, eating out, and movie-going. That would reduce the demand for goods and help clear supply chains.
The Associated Press contributed to this story