NATIONAL NEWS

This key measure of inflation climbed at the fastest pace since 1982 last month

Feb 25, 2022, 3:06 PM | Updated: Jun 8, 2022, 3:18 pm
FILE: Groceries (Photo by Stefani Reynolds / AFP) (Photo by STEFANI REYNOLDS/AFP via Getty Images)...
FILE: Groceries (Photo by Stefani Reynolds / AFP) (Photo by STEFANI REYNOLDS/AFP via Getty Images)
(Photo by STEFANI REYNOLDS/AFP via Getty Images)

(CNN) — Yet another key measure of inflation ticked higher at the start of the year, rising at its fastest pace in nearly 40 years.

The price index tracking consumer spending increased by 6.1% between January 2021 and January 2022, according to new data from the Commerce Department released Friday. That was the biggest annual increase since February 1982.

Stripping out food and energy costs, which tend to be more volatile, prices rose 5.2% over the same period. It was the fastest advance since April 1983.

For the month of January, prices rose 0.6%, or 0.5% excluding energy and food, in line with economists’ predictions but at a faster rate than in the month prior.

The personal consumption expenditure price index, or PCE, is the Federal Reserve’s preferred measure of inflation. Keeping prices stable is one of the Fed’s main tasks. Fed Chairman Jerome Powell hinted in January that it would begin to raise interest rates to combat the high pandemic-era inflation. The first such rate increase is expected at the central bank’s March meeting. Friday’s report likely has not changed that trajectory.

Economists and investors initially thought the Fed might go big for its first hike of the Covid era and raise rates by a half-percentage point, but Russia’s invasion of Ukraine hurt the chances of that.

The geopolitical developments are affecting energy prices, which in turn are one of the biggest contributors to inflation. Sky-high gas prices could hurt consumer spending and might mean the central bank wants to tread carefully in reining in inflation.

“Despite the war in Ukraine, the Fed is going to be forced to raise interest rates next month and they will have pressure to raise rates and/or reduce their balance sheet at the same pace or quicker than would have been the case had Russia not invaded Ukraine,” said Chris Zaccarelli, chief investment officer for Independent Advisor Alliance, in emailed comments.

Market expectations for a quarter-percentage-point rate increase are above 80% as of Friday morning, according to the CME FedWatch Tool.

 

Flat incomes, but rising prices

 

Friday’s Commerce Department data shows that January wasn’t pleasant for Americans. While incomes didn’t budge, prices — and therefore spending — rose.

It was the worst month for personal incomes since September, when they actually declined. Disposable, or after-tax, incomes inched up by 0.1%, also the worst performance since September. To sum it up, Americans didn’t have a lot of extra dollars in their wallets at the start of the year.

While incomes stayed mostly flat, the personal savings rate fell, dropping to 6.4%, compared with 8.2% in December.

Spending still rose: The report showed that consumer purchases rose by 2.1%, reversing a downtrend from December. January was the best month for spending since March last year.

In principle, this is good news because the economy needs consumer spending to be strong to recover. The rising prices for goods and services are a big part of the story: Even if people buy the exact same things as they did a year ago, their bills are now higher.

But economists and companies worry that there will be a point at which prices are high enough to deter folks from spending.

Consumer sentiment has already been hurt by the high inflation.

On Friday, the University of Michigan’s final look at February sentiment revealed a small uptick from the initial data, but it wasn’t enough to change the message: Americans have not felt this pessimistic about the economy in a decade.

“The February descent resulted from inflationary declines in personal finances, a near-universal awareness of rising interest rates, falling confidence in the government’s economic policies, and the most negative long-term prospects for the economy in the past decade,” said Richard Curtin, chief economist of the Survey of Consumers, about the data.

KSL 5 TV Live

Top Stories

National News

Chickens, existing in their coup....
JOSH FUNK AP Business Writer

Bird flu prompts slaughter of 1.8M chickens in Nebraska

Nebraska agriculture officials say another 1.8 million chickens must be killed after bird flu was found on a farm. It's the latest sign that the outbreak has kept spreading after having already prompted the slaughter of more than 50 million birds nationwide. The Nebraska Department of Agriculture said Saturday that the state's 13th case of bird flu was found on an egg-laying farm in northeast Nebraska's Dixon County. All the chickens on the Nebraska farm are being killed to limit the spread of the disease. Officials say the virus presents little risk to human health because human cases are extremely rare and infected birds aren't allowed into the nation's food supply.
13 hours ago
Entrance to Atlantic Station shopping center in Atlanta, Georgia....
Raja Razek, CNN

At least 1 person killed and 5 wounded in a shooting at a shopping district near downtown Atlanta, police say

Entrance to Atlantic Station shopping center in Atlanta, Georgia.
13 hours ago
ATLANTA, GEORGIA - NOVEMBER 04: People wait in line for early voting for the midterm elections at P...
CNN

Early voting begins in Georgia, kicking off Senate runoff race 

A week-long early voting period begins Saturday in some Georgia counties as Democratic Sen. Raphael Warnock and Republican challenger Herschel Walker enter a week-and-a-half, post-Thanksgiving sprint to their December 6 runoff election.
2 days ago
NEW YORK, NY - DECEMBER 13: (L to R) President-elect Donald Trump and Kanye West stand together in ...
CNN

Ye announces 2024 presidential bid, after dinner with former President Donald Trump

Kanye West posted several videos on Twitter Thursday, claiming he met with former President Donald Trump asking him to be his running mate.
2 days ago
FORT LAUDERDALE, FL - APRIL 11:  Passengers check in at the ticket counter for Frontier Airlines Ap...
Ramishah Maruf, CNN

Frontier Airlines no longer has a customer service phone line

Customers who need flight information or want to make changes to travel plans can no longer call Frontier Airlines and speak to an agent, the company confirmed to CNN Saturday.
2 days ago
SpaceX’s Falcon 9 rocket with the Dragon spacecraft atop is seen as Space X and NASA....
Ashley Strickland and Jackie Wattles, CNN

SpaceX launches tomato seeds, other supplies to International Space Station

SpaceX is carrying a fresh haul of supplies to the International Space Station this weekend after bad weather at the launch site forced the company to wave off its first attempt.
2 days ago

Sponsored Articles

house with for rent sign posted...
Chase Harrington, president and COO of Entrata

Top 5 reasons you may want to consider apartment life over owning a home

There are many benefits of renting that can be overshadowed by the allure of buying a home. Here are five reasons why renting might be right for you.
Festive kitchen in Christmas decorations. Christmas dining room....
Lighting Design

6 Holiday Decor Trends to Try in 2022

We've rounded out the top 6 holiday decor trends for 2022 so you can be ahead of the game before you start shopping. 
Happy diverse college or university students are having fun on their graduation day...
BYU MBA at the Marriott School of Business

How to choose what MBA program is right for you: Take this quiz before you apply!

Wondering what MBA program is right for you? Take this quiz before you apply to see if it will help you meet your goals.
Diverse Group of Energetic Professionals Team Meeting in Modern Office: Brainstorming IT Programmer...
Les Olson

Don’t let a ransomware attack get you down | Protect your workplace today with cyber insurance

Business owners and operators should be on guard to protect their workplace. Cyber insurance can protect you from online attacks.
Hand turning a thermostat knob to increase savings by decreasing energy consumption. Composite imag...
Lighting Design

5 Lighting Tips to Save Energy and Money in Your Home

Advances in lighting technology make it easier to use smart features to cut costs. Read for tips to save energy by using different lighting strategies in your home.
Portrait of smiling practitioner with multi-ethnic senior people...
Summit Vista

How retirement communities help with healthy aging

There are many benefits that retirement communities contribute to healthy aging. Learn more about how it can enhance your life, or the life of your loved ones.
This key measure of inflation climbed at the fastest pace since 1982 last month