US consumer prices rose in October at the fastest annual pace since 1990, cementing high inflation as a hallmark of the pandemic recovery and eroding spending power even as wages surge.

The consumer price index (CPI) increased 6.2% from October 2020, according to labor department data released Wednesday. The CPI rose 0.9% from September, the largest gain in four months. Both advances exceeded all estimates in a Bloomberg survey of economists.

Higher prices for energy, shelter, food and vehicles fuelled the supercharged reading and indicated inflation is broadening out beyond categories associated with reopening.

Stocks opened lower, while the yield on the 10-year Treasury rose and the dollar strengthened.

Against a backdrop of solid demand, businesses have been steadily raising prices for consumer goods and services at the same time supply chain bottlenecks and a shortage of qualified workers drive up costs. 

Fed pressure

The pickup suggests higher inflation will be longer-lasting than previously thought, putting pressure on Federal Reserve officials to end near-zero interest rates sooner than expected and potentially to quicken the pace of the bond-buying taper announced last week.

The data also threaten to worsen political challenges for President Joe Biden and Democrats as they seek to pass a nearly $2-trillion tax-and-spending package and defend razor-thin congressional majorities in next year’s midterm elections.

A report on Tuesday showed prices paid to US producers also accelerated in October, largely due to higher goods costs, and adding to concerns about persistent price pressures across the globe.

In China, inflation at the factory level in October increased by the most in 26 years, while consumer prices in Brazil sped up by more than forecast.


Excluding the volatile food and energy components, so-called core inflation rose 0.6% from the prior month and 4.2% from a year earlier. The annual increase was the largest since 1991.

Shelter costs — which are considered to be a more structural component of the CPI and make up about a third of the overall index — rose 0.5% in October, the most in four months as higher rents and home prices feed into the data. The cost of hotel stays increased.

Prices for new cars rose 1.4% in October as a global shortage of semiconductors continues to limit inventories and drive up costs. Used-vehicle prices jumped 2.5%.

Americans are also facing higher costs for basic necessities: Food was up 5.3% from year ago, the most since January 2009; fuel rose 6.1% from September, the biggest gain since March; electricity costs jumped 1.8%, the largest monthly increase since 2014; and fuel oil advanced 12.3% from prior month, the most since 2007.

“Higher energy prices, intensification of supply-chain bottlenecks and higher rents all pushed up prices briskly in the consumer basket,” Bloomberg Economics’ Anna Wong and Andrew Husby said in a note. Looking ahead, “those factors and adverse base effects should keep the headline CPI from peaking until January”.

“We haven’t seen, I’ll say, any more resistance to our price increases than we’ve seen historically,” said McDonald’s CFO Kevin Ozan in an October 27 earnings call.

Meanwhile, Procter & Gamble CFO Andre Schulten said on October 19:  “We have now announced pricing in nine out of ten categories, so very broad based.”

While most CPI categories rose, the cost of airfares declined for a fourth month and apparel prices were unchanged.

Wages have strengthened markedly in recent months — with some measures rising by the most on record — but higher consumer prices are eroding Americans’ buying power. 

Inflation-adjusted average hourly earnings fell 1.2% in October from a year earlier, separate data showed on Wednesday.

Bloomberg News. More stories like this are available on bloomberg.com


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