Inflation surged 6.8% in November, even more than expected, to fastest rate since 1982

Inflation accelerated at its fastest pace since 1982 in November, the Labor Department said Friday, putting pressure on the economic recovery and raising the stakes for the Federal Reserve.

The consumer price index, which measures the cost of a wide-ranging basket of goods and services, rose 0.8% for the month, good for a 6.8% pace on a year over year basis and the fastest rate since June 1982.

Excluding food and energy prices, so-called core CPI was up 0.5% for the month and 4.9% from a year ago, which itself was the sharpest pickup since mid-1991.

The Dow Jones estimate was for a 6.7% annual gain for headline CPI and 4.9% for core.

Price increases came from familiar culprits.

Energy prices have risen 33.3% since November 2020, including a 3.5% surge in November. Gasoline alone is up 58.1%.

Food prices have jumped 6.1% over the year, while used car and truck prices, a major contributor to the inflation burst, are up 31.4%, following a 2.5% increase last month.

The Labor Department said the increases for the food and energy components were the fastest 12-month gains in at least 13 years.

Shelter costs, which comprise about one-third of the CPI, increased 3.8% on the year, the highest since 2007 as the housing crisis accelerated.

Markets reacted positively to the report, with stock indexes on Wall Street rising, while government bond yields moved lower. Some economists thought Friday’s report could indicate even sharper inflation of greater than 7% for the headline number.

Fed officials have attributed the inflation jump to factors associated with the pandemic. Strong consumer demand for goods and supply chain bottlenecks have been major factors, though the price increases have been stronger and more persistent than policymakers had anticipated.

“There’s no question no matter how you look at it, even if you take out the extremes caused by the pandemic, it’s still very high inflation,” said Randy Frederick, managing director of trading and derivatives at Charles Schwab. “This is still supply chain disruption, semiconductor-related inflation.”

Central bank officials have indicated that will begin slowing the help they’re providing in an effort to tamp down inflation. Investors widely expect the Fed to double the tapering of its asset purchases to $30 billion a month, likely starting in January. That would enable the Fed to start raising interest rates as soon as next spring.

Inflationary pressures have been hitting workers hard.

Though gross pay has increased 4.8% over the past year, real average hourly earnings accounting for inflation declined another 0.4% for November and are down 1.9% for the 12-month period, the Labor Department said in a separate release.

While much of the pandemic-era inflation has come from soaring demand for products such as vehicles and other long-lasting goods, services inflation also has been on the rise. Excluding energy, services costs rose 0.4% in November and are up 3.4% for the 12 months, the quickest annual pace April 2007.

Apparel costs also were notably higher for the month, rising 1.3% for the month and 5% for the year, ahead of the holiday shopping season.

Some economists, however, think inflation is near its peak, particularly with energy prices declining in recent weeks. While West Texas Intermediate oil is up more than 52% in 2021, the price has come down about 14% from its most recent peak in November.

With unemployment claims running at their lowest pace since 1969 and gross domestic product expected to show strong gains to end 2021 after a lackluster third quarter, inflation remains the biggest problem for the recovery.

President Joe Biden has been paying a political price for surging prices: A recent CNBC survey showed his approval rating stuck at just 41%, due in large part to 56% of respondents who disapprove of his economic record, compared to just 37% who approve.