Consumers were hit hard by rising prices in February as inflation rose to a level not seen in more than four decades.
The Consumer Price Index (CPI), which measures a wide-ranging basket of goods and services used by the average American, jumped 7.9% over the last year, the highest rate since January of 1982, according to data from the Bureau of Labor Statistics (BLS).
Consumer prices jumped 0.8% in February alone. That’s higher than previous estimates from economists surveyed by Dow Jones, who had predicted a 0.7% monthly rise in consumer prices and 7.8% year-over-year gain, CNBC reported.
Food prices were a big contributor to inflation, as food costs at home rose 8.6% over the past year, buoyed by the fastest monthly gains since April 2020 at the start of the pandemic.
The energy index also skyrocketed a whopping 25.6% year-over-year, and 3.5% in February alone, as many economists predict the figure will only move higher.
But while volatile food and gas prices did contribute to rising inflation, core inflation, which measures changes in the CPI without energy and food, rose 6.4%, showing that prices are up across the board.
Economists warned this might not be the end of rising costs for consumers.
“It was hoped a few weeks ago that these readings would mark the high of this inflation episode. No longer,” Mohamed El-Erian, President at Queen’s College Cambridge and senior adviser at Gramercy Funds, wrote on Thursday. “With so many price pressures in the pipeline, even this 40-year high print will go higher.”
Russia invaded Ukraine at the end of February, so experts are warning the latest inflation numbers likely don’t fully encapsulate the economic mayhem that is causing worldwide.
“We thought that inflation would come down, especially due to the untangling of the global supply chain, but we don’t know how what’s happening in Ukraine will re-tangle that,” Joel Naroff, chief economist at Naroff Economics LLC, told the WSJ on Thursday.
After the invasion, gas prices have only gotten worse, and are likely to push next month’s inflation numbers even higher.
“Thursday’s inflation data is continued confirmation that inflation is not transitory and has not peaked,” Robert Schein, CIO of Blanke Schein Wealth Management, told Yahoo Finance. “Thursday’s data is for February, which does not account for the early March spike in oil prices.”
And even though prices are higher, it doesn’t look like wages are keeping pace.
Inflation-adjusted average hourly earnings took a 0.8% hit in February as a result of rising consumer prices, adding to a 2.6% decline over the past year, according to data from the BLS.
“Robust pay increases have been no match for the higher costs households are facing on rent, food, electricity, gasoline, and a pervasive list of both goods and services,” Greg McBride, chief financial analyst at Bankrate, wrote in an email on Tuesday. “The buying power of Americans is being squeezed more and more each day, and you see this reality reflected in the dour consumer sentiment readings.”
Vehicle costs, which have driven inflation over the past year, did show some signs of slowing. Used car and truck prices were down 0.2% month-over-month in their first monthly decline since September of 2021. Still, prices are up an incredible 41.2% over the past year, with new car prices also causing pain for the consumer, up 12.4% on an annual basis.
Airfares also more than doubled their January monthly gains, rising 5.2% over the year as fading Omicron fears and easing restrictions led to increased air travel. Those prices are likely to go up even more, as the price of jet fuel is expected to increase significantly over the next few months following sanctions on Russian oil.
Housing costs also jumped in February, increasing by 4.7% compared to a year ago.
President Biden released a statement soon after the new inflation numbers were released Thursday morning touting a strong jobs recovery and pointing the finger at Russia for the latest price increases.
“A large contributor to inflation this month was an increase in gas and energy prices as markets reacted to Putin’s aggressive actions,” Biden wrote. “Americans can know this: the costs we are imposing on Putin and his cronies are far more devastating than the costs we are facing.”
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