WASHINGTON (AP) – A Tennessee warehouse worker faces price hikes that far exceed her modest pay hike.
The owner of a bakery business in Massachusetts had to reduce his product offering and personally absorb higher costs.
An executive at a Connecticut grocery chain said he was sharing his higher costs with his suppliers so he didn’t have to raise prices across the board.
Across the United States, in homes and businesses, the highest inflation in a generation is increasing financial pressures and forcing people to adjust to a new reality.
The government report on Friday that consumer prices have jumped 6.8% in the past year – the highest rate of inflation in 39 years – showed some of the biggest cost increases concerned basic necessities such as food, energy, shelter, automobiles and clothing. These are goods and services that millions of Americans regularly depend on in their daily lives.
Low-income households with little or no cash cushions are particularly affected. For them, the acceleration in consumer prices canceled out any increase in wages they might have received. The surge in prices also complicated the Federal Reserve’s plans to cut aid to the economy and coincided with declining public support for President Joe Biden, who took steps to try to ease inflationary pressures.
The rise in inflation has been fueled by a mix of factors resulting from the rapid rebound from the pandemic recession: a flood of government stimulus, ultra-low rates designed by the Fed, and supply shortages at factories. Manufacturers have been slowed by stronger than expected customer demand, COVID-related closures and overwhelmed ports and freight stations.
Employers, struggling with labor shortages, have also raised wages, and many have raised prices to offset their higher labor costs, adding to inflation. .
The result has been price increases for goods ranging from food and used vehicles to electronics, furniture and rental cars. The average price of a used vehicle climbed nearly 28% from November 2020 to last month – to a record high of $ 29,011, according to data compiled by Edmunds.com.
The acceleration in prices, which began after the pandemic struck as Americans trapped in their homes flooded factories with orders for goods, spilled over to services, from apartment rents and restaurant meals to services. medical and entertainment. Even some retailers who have built their businesses around the allure of ultra-low prices have started to stimulate them.
Over the past 12 months, the costs paid by a typical American family have increased by about $ 4,000, according to calculations by Jason Furman, a Harvard economist and former Obama aide in the White House.
Although Americans’ overall income has also increased since the pandemic, a new survey has found that many more people are noticing higher inflation than higher wages. Two-thirds say their household costs have increased since the pandemic, compared with only about a quarter who say their incomes have increased, according to the Associated Press-NORC Center for Public Affairs Research poll.
Among them is Karyn Dixon, who received a raise this year that came close to covering her higher expenses. Dixon, 55, works as a material handler in a warehouse near her home, not far from Knoxville, Tennessee.
Like many businesses in recent months, his employer has increased workers’ wages – in his case by $ 1.75 an hour. Yet that’s barely enough to keep pace with higher health insurance costs and more expensive food and gasoline.
The more expensive gas “puts the brakes on things, especially when you live in a rural area,” Dixon said. âIf we need something important, we have to go to the next town or to Knoxville. Our options are limited.
âThere really hasn’t been a lot of benefit,â she said of the increase. “You earn extra money, but you turn around and have to pay more for food and gas, just so you can get to work.”
James Lawson, who runs a baking business in Stockbridge, Massachusetts, says soaring food prices have forced him to cut back on the number of croissants and wedding cakes he makes. The prices of its basic ingredients have climbed an average of 25% over the past six months, and Lawson says he can only pass a portion of the extra costs on to his customers. Its activity is down 30 to 40% compared to a year ago.
âIt’s stressful,â Lawson said. âThere are nights when you don’t sleep. I think it will get worse before it gets better.
Lawson was buying 100 pounds of Kerry Gold Butter for $ 300 for his business. Now, he said, it costs him $ 450 to $ 475. And he thinks he can’t increase the prices of his desserts enough to offset his own higher expenses. He therefore had to absorb a large part of the costs himself, which means reducing his own purchases of food and clothing.
âInstead of buying a gallon, you buy a liter and see how long it lasts,â Lawson said. “And then you don’t spend that much on your food.”
Stew Leonard Jr., who is president and CEO of a family-owned Connecticut and New York-based supermarket chain founded by his father, said that by sharing his higher costs with his suppliers, he manages to avoid significantly increase the prices of its customers.
âWe are absorbing a lot of costs,â Leonard said. âWe’re trying to keep our prices low, and we’re going to get by and see where it goes. It’s a very erratic market right now.
His chain avoids increasing the prices of basic products such as milk, butter and eggs. But it charges more for more discretionary items like lobster and filet mignon. The pound of lobster went from $ 8 to $ 11.
While some Leonard customers still buy these more expensive items, low-income shoppers are switching from beef to chicken and blueberries to bananas.
Soaring inflation is weighing on households and businesses outside the United States as well. In Europe, energy costs have pushed consumer prices to their highest level since the euro was launched more than 20 years ago. Annual inflation in the 19 countries that use the euro hit 4.9% in November, according to the European Union’s statistical agency. Inflation has risen much more in some other European countries, with Poland almost 8%, Lithuania above 9% and Turkey at a staggering 21%.
For U.S. consumers, the 6.8% rise in inflation for the 12 months ending in November was the largest year-over-year increase since rising 7.1% for the year that ended in June 1982. The hike came at a time when the Federal Reserve had pushed double-digit interest rates up in its effort to stem the runaway inflation triggered by oil shocks in the United States. 1970s.
Persistently high inflation surprised the Fed, whose chairman Jerome Powell had for months called inflation only “transient,” a short-term consequence of congested supply chains. Two weeks ago, however, Powell signaled a change, implicitly acknowledging that high inflation has lasted longer than he expected. He suggested that the Fed would likely act faster to phase out its ultra-low rate policies than it previously anticipated.
This would put the Fed on track to start raising its key short-term interest rate as early as the first half of next year. This rate has been close to zero since March 2020, when the coronavirus plunged the economy into a deep recession. Borrowing rates would increase for some consumer and business loans.
Financial markets, which had largely anticipated Friday’s inflation figures, took them in stride. T-bill yields and stock prices have remained relatively stable, while a measure of fear on Wall Street has eased. Russell Price, chief economist at Ameriprise, said the market response suggests investors are now accepting that the Fed will speed up its withdrawal from the emergency economic aid it provided after the pandemic.
Speaking at the White House, Biden said of the inflation report: âI think this is the peak of the crisis, and I think you will see a change sooner and faster than most. people don’t think so “towards more moderate price increases.
D’Innocenzio reported from New York. AP writers Josh Boak and Christopher Rugaber in Washington, Tom Krisher in Detroit, and Stan Choe in New York contributed to this report.