The economy observed record-breaking inflation surge in more than 30 years, as the consumer prices rose 6.2% in October. The U.S. Bureau of Labor Statistics reported that the consumer pricing index for all Urban Consumers (CPI-U) jumped 0.9%. The rise in consumer prices affected the housing affordability as it faced a sharp decline of 151.9 in Q2.
Shelter costs that contribute one-third to CPI advanced 0.5% month-over-month and 3.5% per annum. Fuel prices soared 12.3% while energy index increased 4.8%. Rental apartments, medical services and restaurants meals surged 0.5% in October. Labor Department stated that real wages following the inflation has dropped 0.5%. Initial claims for jobless benefits declined to 2,67,000.
Inflation rates have skyrocketed and are estimated to be the largest increase since December 1990. Although inflation could be more persistent than anticipated, policymakers expect the conditions to return to normal over the next year and consider current price measures temporary due to Covid specific issues.
The annual core price index, excluding volatile food and energy, surged 4.6% in October. Rising labor costs and higher cost for beef influenced the food index as food prices climbed 0.9%. Meat, poultry, fish and eggs collectively rose 1.7% on a monthly basis and 11.9% year over year. Annually, Used vehicles were major contributors, rising 26.4% whereas New vehicles grew 9.8%. Stock market futures fell and bond yields flared up.
Bottlenecked ports, supply shortages, soaring consumer demands are some of the driving factors of inflation. Economists expect supply chains to strengthen as consumers start spending more on travel and entertainment during pandemic recovery.