Inflation accelerates at record pace in November, headache for Biden

Consumer prices in the United States rose in November at a rate unprecedented in nearly 40 years, an additional complication for Joe Biden who has promised to turn the tide and is struggling to get his social and environmental spending plan adopted.

The price increase amounted to 6.8% last month compared to November 2020, after + 6.2% in October, according to the consumer price index (CPI) released Friday by the Labor Department. It’s the biggest increase since 1982. And Americans continue to pay more for everything: from food, to clothes, to cars, gasoline, electronics and plane tickets.

“The figures this morning confirm what every American family already knows: inflation is out of control under the leadership of the Democrats,” reacted the powerful Republican leader in the Senate Mitch McConnell, in a statement.

As last month, strong consumer demand has again come up against supply problems linked to the pandemic and it is the prices of the energy sector that have increased the most over one year (+ 33.3%) .

Excluding the volatile energy and food sectors, inflation also remains strong (+ 4.9%).

Even before the release of November inflation figures, Joe Biden warned Thursday that prices had remained “high” in November.

But he was quick to minimize the scope, stressing that it did not reflect “today’s reality”, highlighting the drop in energy prices in recent weeks, after collection data released Friday.

In addition, these data “do not reflect the price reductions expected in the weeks and months to come, as in the automotive market,” he also assured.

The prices of new cars jumped 11.1%, those of used cars 31.4% last month.

Compared to the previous month, the recorded price increase slowed slightly: + 0.8% against + 0.9% in October. But it is higher than analysts’ projections (+ 0.6%), a sign that inflation is persistent.

In addition, the investigation was carried out before the emergence of the Omicron variant of Covid-19, which poses a new threat to the US and global economy.

Some economists anticipate an exacerbation of the logistical problems linked to new sources of contamination around the world, which could accentuate the inflationary surge.

After arguing that inflation was “temporary” and linked to the economic recovery from the historic 2020 recession caused by the Covid-19 pandemic, the Biden administration and the US central bank have come to admit that inflation was more durable than expected.

For the Republican opposition, Joe Biden’s economic policy of injecting trillions of dollars into the economy has contributed to the inflationary surge, which his administration denies.

Last month, in the face of criticism even in his Democratic camp, Mr. Biden assured that his “top priority” was to reverse the trend. But the task turns out to be much more difficult than expected.

Deceleration?

“The price of gasoline at the pump has already started to fall nationwide” and is now below the 20-year average in 20 states, Biden said.

Natural gas prices this week are 25% below their November average, he said.

According to him, the prices of used cars will drop “in the months to come”.

The surge in car prices is directly linked to the global semiconductor shortage. But several large automakers have recently signaled that they are able to produce at full capacity again, paving the way for price normalization.

This report is released a few days before the Federal Reserve (Fed) meeting is held. The institution will publish new economic forecasts on Wednesday, including that of inflation.

It must also announce an acceleration in the reduction of its monetary aid program to the economy to raise key rates in an effort to contain inflation.

The Fed is currently forecasting a deceleration in inflation in the second half of 2022.

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