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    Here's Why Inflation Is Worrying Washington

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    Price gains have moved up sharply for months, but the fact that the trend is lasting and broadening has newly put policymakers on red alert.Aquan Brunson, 45 and from Brooklyn, used to buy three slices of cheese pizza from 99 Cents Pizza of Utica for lunch each day. But about three months ago, inflation ate away that third slice. The shop has pasted over its old sign to alert customers that it is now “$1.50 Hot Pizza.”“The dollar doesn’t take us far,” said Mr. Brunson, patting his greasy lunch down with paper napkins on a gray December afternoon. “The cost of everything is going up.”Consumers across the country can tell you that inflation has been high this year, evidenced by more expensive used cars, pricier furniture and the ongoing demise of New York City’s famous dollar slice. But until recently, policymakers in Washington responded to it with a common refrain: Rapid price increases were likely to be transitory.Last week, policymakers said it was time to retire the label “transitory,” and acknowledged that the price increases have been proving more persistent than expected.Jerome H. Powell, the Fed chair, said that while his basic expectation is that price gains will cool off, there’s a growing threat that they won’t do so soon or sufficiently.“I think the risk of higher inflation has increased,” he said.A fresh report set for release on Friday is expected to reinforce that concern. The Consumer Price Index could show that inflation picked up by 6.8 percent over the past year, the fastest pace in nearly 40 years. More worrisome for the Fed is that inflation is broadening to many products and services, not just those directly affected by the supply chain woes that have driven up prices for cars and electronics.Here is a rundown about what to know about the price pops sweeping America and the world — and what to expect when new U.S. consumer price inflation figures are released on Friday.Inflation measures price increases.When economists and policymakers talk about “inflation,” they typically mean the increase in prices for the things that people buy out of pocket — tracked by the Consumer Price Index, or C.P.I. — or the change in the cost of things that people consume either out of pocket or through government payments and insurance, which is tracked by the less-timely Personal Consumption Expenditures index.Both measures are way up this year, and C.P.I. data set for release on Friday is expected to show that inflation picked up by the most since 1982. Back then, Paul Volcker was the Fed chair, and he was waging a war on years of rapid price gains by pushing interest rates to double digits to cripple business and consumer demand and cool off the economy. Today, interest rates are set at near-zero after policymakers slashed borrowing costs at the beginning of the pandemic.Price gains are becoming broader.There are plenty of differences between 1982 and today. Inflation had been low for years leading up to 2021, and pandemic-era lockdowns and the subsequent reopening are behind much of the current price pop.Consumer demand surged just as rolling factory shutdowns and a reshuffle in spending to goods from services caused manufacturing backlogs and overwhelmed ports. That’s why policymakers were comfortable dismissing high inflation for a while: It came from kinks that seemed likely to eventually work themselves out.But price gains are increasingly coming from sectors with a less clear-cut, obviously temporary pandemic tieback. Rents, which make up a big chunk of inflation, are rising at a solid clip.“Housing — that is the key broadening,” said Laura Rosner, an economist at MacroPolicy Perspectives.The potential for wider and more lasting price pressures have put Fed officials on edge. Policymakers at the central bank, who had been slowly tiptoeing away from supporting the economy, broadcast clearly last week that they are preparing to speed up the retreat.“They know this report is coming,” Ms. Rosner said of Friday’s anticipated number. “It’s going to confirm and explain why we’ve seen such a sharp shift.”Supply chain snarls are lasting.Abdul Batin, owner of 99 Cents Pizza of Utica, plans to rebrand his Brooklyn pizza store as “$1.50 Pizza of Utica.”Jeanna Smialek/The New York TimesDisruptions to the global flow of goods are not fading as quickly as policymakers had hoped. Additional virus waves have kept factories from running at full speed in Asia and elsewhere. Shipping routes are clogged, and consumers are still buying goods at a robust pace, adding to backlogs and making it hard for the situation to normalize.Households have some $2.5 trillion in excess savings, thanks in part to pandemic-era stimulus, which could help to keep them buying home gym equipment and new coffee tables well into next year.“The earliest we see things normalizing is really the end of 2022,” said Phil Levy, chief economist at the logistics firm FlexPort. When it comes to misunderstanding inflation, he said, “part of the problem is that we treated the supply chain like it was a special category, like food or energy.”But as 2021 has made inescapably clear, the global economy is a delicately balanced system. Take the car industry: Virus-spurred semiconductor factory shutdowns in Taiwan delayed new car production. Given the dearth of new autos, rental car companies had to compete with consumers for previously owned vehicles, leaving shortages on used car lots. The chain reaction pushed prices higher at every link along the way.Global snarls have also helped to push up food prices, as Abdul Batin, owner of 99 Cents Pizza of Utica, can attest. He plans to rebrand it as “$1.50 Pizza of Utica,” and explains that while some customers balked at the cost increase, he couldn’t help it.“Everything is going up right now — cheese, flour, even the soda price,” he said.Wages are also rising.A grocery store in Queens, N.Y. Global snarls have also helped to push up food prices.George Etheredge for The New York TimesAnother thing that could keep inflation high? Wages are climbing swiftly, and some companies have begun to talk about passing those rising expenses onto customers, who seem willing and able to pay more. The Employment Cost Index, a measure the Fed watches closely, picked up notably in the three-month period that ended in September.The risk is that this is an early, and still dim, echo of the kind of wage-and-price dynamic that helped to fuel higher prices in the 1970s and 1980s. Back then, unions were a much more powerful force, and they helped to make sure pay kept up with rising prices. Inflation and wage gains pushed each other into an upward spiral, to the point that price increases leapt out of control and demanded a Fed response.In the years since, workers have typically had less formalized bargaining power. But employers are contending with labor shortages as the virus keeps many would-be employees on the sidelines and as demand booms. That is giving workers the ability to command higher pay as they face climbing costs themselves, and it is prompting many employers to lift wages to compete for scarce talent. That could keep demand solid by bolstering peoples’ wherewithal to spend.“Looking ahead, businesses across all major sectors foresee continued widespread wage hikes,” the New York Fed reported in its section of the Fed’s Beige Book, an anecdotal survey of business and labor contacts carried out by regional Fed banks.In Atlanta’s region, the Beige Book noted, “several contacts mentioned that labor costs were already being passed along to consumers with little resistance, while others said plans were underway to do so.”Mr. Brunson — the pizza aficionado — works at a grocery store. They’ve raised his pay, he said, but it is not enough to keep up with climbing cost of food and other expenses.“They gave us an extra dollar, but that’s just to offset the inflation,” he said. He and his family, three adult children who live with him, are coping by cutting back. “No eating out, less food, less meat.” More

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    Supply-Chain Kinks Force Small Manufacturers to Scramble

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    Facing delays, shortages and higher prices for raw materials, small manufacturers are finding new sources. Not all are able to pass along the costs.Peak season has arrived for DPS Skis, a manufacturer and distributor of mountain sports gear in Salt Lake City. But this year, the winter challenges began far from the slopes.A kinked-up global supply chain has forced Alex Adema, the chief executive, to find new sources for the wood used in his company’s skis and to get crucial items like bindings and poles.“The window is really short,” he said. “Skiers get excited when they know snow is coming.”Facing long delays in getting finished goods and raw material from Asia and Europe because of a lack of freighter space and overloaded ports, small to medium-size manufacturers like DPS are being forced to adapt quickly.Unlike giants such as Walmart, they lack the means to charter their own cargo ships — or to design their own semiconductors, as Ford Motor said it would do this month. Instead, they are revisiting some of the practices — lean inventories, just-in-time deliveries, and reliance on components from China and other faraway suppliers — that were part of the established factory playbook.“The more control you have over your own supply chain, the better,” said Scott Paul, president of the Alliance for American Manufacturing, a policy group representing manufacturers and the United Steelworkers.In practice, that means meeting needs through less-distant sources. “That way,” Mr. Paul said, “you’re either first in line or have a leg up.” But that can push up costs — a burden that is sometimes passed along to customers, and in other cases is absorbed by the businesses.Until this year, DPS bought the Paulownia species of hardwood for the core of many of its skis from China, but shipping delays meant that running out of the material was a real possibility. At one point as supplies dwindled in October, “we were holding our breath,” Mr. Adema said.DPS found a supplier of Paulownia in North Carolina, and after much testing, the specifications matched up. “You can’t just swap species,” Mr. Adema said. “We’re excited about getting the wood from North Carolina in terms of sustainability and less environmental imprint. Any time you can throw something on a train in the U.S., it’s better than a ship or plane.”Not everything is available domestically, however. Ski poles and ski bindings still come from Europe, and DPS has been forced to resort to airfreight to bring in supplies of these items, even though it’s four times as expensive as shipping by sea.And while DPS ships by boat whenever possible, it’s hardly cheap — the price of shipping a container has gone from roughly $5,000 to $20,000 in some cases, Mr. Adema said. Overall, raw material costs for DPS are up 10 to 15 percent..css-1xzcza9{list-style-type:disc;padding-inline-start:1em;}.css-3btd0c{font-family:nyt-franklin,helvetica,arial,sans-serif;font-size:1rem;line-height:1.375rem;color:#333;margin-bottom:0.78125rem;}@media (min-width:740px){.css-3btd0c{font-size:1.0625rem;line-height:1.5rem;margin-bottom:0.9375rem;}}.css-3btd0c strong{font-weight:600;}.css-3btd0c em{font-style:italic;}.css-1kpebx{margin:0 auto;font-family:nyt-franklin,helvetica,arial,sans-serif;font-weight:700;font-size:1.125rem;line-height:1.3125rem;color:#121212;}#NYT_BELOW_MAIN_CONTENT_REGION .css-1kpebx{font-family:nyt-cheltenham,georgia,’times new roman’,times,serif;font-weight:700;font-size:1.375rem;line-height:1.625rem;}@media (min-width:740px){#NYT_BELOW_MAIN_CONTENT_REGION .css-1kpebx{font-size:1.6875rem;line-height:1.875rem;}}@media (min-width:740px){.css-1kpebx{font-size:1.25rem;line-height:1.4375rem;}}.css-1gtxqqv{margin-bottom:0;}.css-19zsuqr{display:block;margin-bottom:0.9375rem;}.css-12vbvwq{background-color:white;border:1px solid #e2e2e2;width:calc(100% – 40px);max-width:600px;margin:1.5rem auto 1.9rem;padding:15px;box-sizing:border-box;}@media (min-width:740px){.css-12vbvwq{padding:20px;width:100%;}}.css-12vbvwq:focus{outline:1px solid #e2e2e2;}#NYT_BELOW_MAIN_CONTENT_REGION .css-12vbvwq{border:none;padding:10px 0 0;border-top:2px solid #121212;}.css-12vbvwq[data-truncated] .css-rdoyk0{-webkit-transform:rotate(0deg);-ms-transform:rotate(0deg);transform:rotate(0deg);}.css-12vbvwq[data-truncated] .css-eb027h{max-height:300px;overflow:hidden;-webkit-transition:none;transition:none;}.css-12vbvwq[data-truncated] .css-5gimkt:after{content:’See more’;}.css-12vbvwq[data-truncated] .css-6mllg9{opacity:1;}.css-qjk116{margin:0 auto;overflow:hidden;}.css-qjk116 strong{font-weight:700;}.css-qjk116 em{font-style:italic;}.css-qjk116 a{color:#326891;-webkit-text-decoration:underline;text-decoration:underline;text-underline-offset:1px;-webkit-text-decoration-thickness:1px;text-decoration-thickness:1px;-webkit-text-decoration-color:#326891;text-decoration-color:#326891;}.css-qjk116 a:visited{color:#326891;-webkit-text-decoration-color:#326891;text-decoration-color:#326891;}.css-qjk116 a:hover{-webkit-text-decoration:none;text-decoration:none;}These kind of increases are coursing through the economy, and are a primary reason inflation is running at the fastest pace in 31 years, with a 6.2 percent increase in prices in October from a year earlier. But unlike many other companies, DPS hasn’t been able to pass on the higher costs to consumers.“Our ski shop customers place their orders in the spring, and they’ve committed to pricing and delivery dates for this upcoming season,” Mr. Adema said. Designed for backcountry touring as well as resort trails, the company’s skis sell for about $800 to $1,400 a pair. Poles begin at $99. “For us to change prices in midstream would not be good for relations with our community,” Mr. Adema added. “We have to absorb the costs.”Other manufacturers face many of the same issues but have more flexibility on prices. Honey-Can-Do, a maker of housewares like storage carts and shelving in Chicago, has been able to pass along its higher costs, said Steve Greenspon, the company’s owner and chief executive.“Everybody knows what’s going on,” Mr. Greenspon said. “It’s become commonplace and accepted this year for retailers to accept cost increases. I’ve heard from merchants that over 90 percent of vendors are giving them price increases.”This trend marks a turnabout from prepandemic days. “If you tried to pass along a major price increase to a big retailer a couple of years ago, there’d be concerns about your relationship,” Mr. Greenspon said. “But in the current atmosphere, it’s the norm.”Honey-Can-Do’s prices are up roughly 10 percent to 25 percent, depending on the raw materials, freight costs and how much corrugated packaging is used in shipping. Its products include a 65-inch baker’s rack with a cutting board and hanging storage that retails for $119.99 and a toy organizer with 12 bins that sells for $59.99.The company has streamlined its product offerings, narrowing the focus to its top sellers. “We don’t want to use up our container capacity with slower-moving items,” Mr. Greenspon said. “We want to use that space for high-velocity items.”“Instead of multiple colors and many variations, companies are making things more neutral,” he added. “We’re focusing on proven winners.”The company is also increasing the inventory it keeps on hand, buying three additional warehouses to hold goods. “Everybody is loading up on inventory,” Mr. Greenspon said, “and prices for warehouses have spiked.”DPS Skis has had to overcome a kinked-up supply chain with steps like changing the source of the wood that goes into skis.Alex Goodlett for The New York TimesThe company’s production facilities are in Asia, so “the supply chain issue is something that dominates every conversation.” Mr. Greenspon said. He has explored moving production to Mexico or the United States — shortening the supply chain, as experts advise — but hasn’t been able to find a satisfactory supplier yet. “You can’t sell what you don’t have,” he said.Reshoring is a buzzword these days, but it’s premature to expect a domestic manufacturing renaissance as a result of the supply-chain mess, said Willy C. Shih, a professor at Harvard Business School. “We will bring things back, but it’s harder than you think,” he said.Understand the Supply Chain CrisisCard 1 of 5Covid’s impact on the supply chain continues. More

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    Supply Chain Shortages Help a North Carolina Furniture Town

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    The furniture capital of the state is ground zero for inflation, labor shortages, hot demand and limited supply. It’s debating how to cope.HICKORY, N.C. — Six months into the coronavirus pandemic, as millions of workers lost their jobs and companies fretted about their economic future, something unexpected happened at Hancock & Moore, a purveyor of custom-upholstered leather couches and chairs in this small North Carolina town.Orders began pouring in.Families stuck at home had decided to upgrade their sectionals. Singles tired of looking at their sad futons wanted new and nicer living room furniture. And they were willing to pay up — which turned out to be good, because the cost of every part of producing furniture, from fabric to wood to shipping, was beginning to swiftly increase.More than a year later, the furniture companies that dot Hickory, N.C., in the foothills of the Blue Ridge Mountains, have been presented with an unforeseen opportunity: The pandemic and its ensuing supply chain disruptions have dealt a setback to the factories in China and Southeast Asia that decimated American manufacturing in the 1980s and 1990s with cheaper imports. At the same time, demand for furniture is very strong.In theory, that means they have a shot at building back some of the business that they lost to globalization. Local furniture companies had shed jobs and reinvented themselves in the wake of offshoring, shifting to custom upholstery and handcrafted wood furniture to survive. Now, firms like Hancock & Moore have a backlog of orders. The company is scrambling to hire workers.“Not to sound trite, but it’s unprecedented,” said Amy Guyer, vice president for human resources and benefits for the parent company that includes Rock House Farm furniture brands such as Hancock & Moore and Century Furniture.Yet the same forces that are making it difficult for overseas manufacturers to sell their goods in the United States — and giving American workers a chance to command higher wages — are also throwing up obstacles.Many of the companies are dependent on parts from overseas, which have been harder — and more expensive — to obtain. Too few skilled workers are seeking jobs in the industry to fill open positions, and businesses are unsure how long the demand will last, making some reluctant to invest in new factories or to expand to towns with bigger potential labor pools.“We would love to expand capacity,” Ms. Guyer said, “but we’re the furniture mecca of North Carolina — every other furniture company is in the same boat we are.”Even if there were enough workers, said Alex Shuford, the chief executive of the company that owns Rock House Farm furniture brands, “the surge isn’t going to last as long as it would take to go to a completely trained work force and get them up to speed.”The current moment, he added, “is abnormal in every way, and not sustainable in any way.”For now, companies in Hickory are seeing a huge upswing thanks to strong demand and limited supply. Prices for couches, beds, kitchen tables and bedding have shot up this year, climbing by 12 percent nationally through October. Furniture and bedding make up a small slice of the basket of goods and services that the inflation measure tracks — right around 1 percent — so that increase has not been enough to drive overall prices to uncomfortable levels on its own. But the rise has come alongside a bump in car, fuel, food and rent costs that have driven inflation to 6.2 percent, the highest level in 31 years..css-1xzcza9{list-style-type:disc;padding-inline-start:1em;}.css-3btd0c{font-family:nyt-franklin,helvetica,arial,sans-serif;font-size:1rem;line-height:1.375rem;color:#333;margin-bottom:0.78125rem;}@media (min-width:740px){.css-3btd0c{font-size:1.0625rem;line-height:1.5rem;margin-bottom:0.9375rem;}}.css-3btd0c strong{font-weight:600;}.css-3btd0c em{font-style:italic;}.css-1kpebx{margin:0 auto;font-family:nyt-franklin,helvetica,arial,sans-serif;font-weight:700;font-size:1.125rem;line-height:1.3125rem;color:#121212;}#NYT_BELOW_MAIN_CONTENT_REGION .css-1kpebx{font-family:nyt-cheltenham,georgia,’times new roman’,times,serif;font-weight:700;font-size:1.375rem;line-height:1.625rem;}@media (min-width:740px){#NYT_BELOW_MAIN_CONTENT_REGION .css-1kpebx{font-size:1.6875rem;line-height:1.875rem;}}@media (min-width:740px){.css-1kpebx{font-size:1.25rem;line-height:1.4375rem;}}.css-1gtxqqv{margin-bottom:0;}.css-19zsuqr{display:block;margin-bottom:0.9375rem;}.css-12vbvwq{background-color:white;border:1px solid #e2e2e2;width:calc(100% – 40px);max-width:600px;margin:1.5rem auto 1.9rem;padding:15px;box-sizing:border-box;}@media (min-width:740px){.css-12vbvwq{padding:20px;width:100%;}}.css-12vbvwq:focus{outline:1px solid #e2e2e2;}#NYT_BELOW_MAIN_CONTENT_REGION .css-12vbvwq{border:none;padding:10px 0 0;border-top:2px solid #121212;}.css-12vbvwq[data-truncated] .css-rdoyk0{-webkit-transform:rotate(0deg);-ms-transform:rotate(0deg);transform:rotate(0deg);}.css-12vbvwq[data-truncated] .css-eb027h{max-height:300px;overflow:hidden;-webkit-transition:none;transition:none;}.css-12vbvwq[data-truncated] .css-5gimkt:after{content:’See more’;}.css-12vbvwq[data-truncated] .css-6mllg9{opacity:1;}.css-qjk116{margin:0 auto;overflow:hidden;}.css-qjk116 strong{font-weight:700;}.css-qjk116 em{font-style:italic;}.css-qjk116 a{color:#326891;-webkit-text-decoration:underline;text-decoration:underline;text-underline-offset:1px;-webkit-text-decoration-thickness:1px;text-decoration-thickness:1px;-webkit-text-decoration-color:#326891;text-decoration-color:#326891;}.css-qjk116 a:visited{color:#326891;-webkit-text-decoration-color:#326891;text-decoration-color:#326891;}.css-qjk116 a:hover{-webkit-text-decoration:none;text-decoration:none;}The question for policymakers and consumers alike is how long the surge in demand and the limitations in supply will last. A key part of the answer lies in how quickly shipping routes can clear up and whether producers like the craftsmen in Hickory can ramp up output to meet booming demand. But at least domestically, that is proving to be a more challenging task than one might imagine.The production floor at Century Furniture’s case goods factory in Hickory.Travis Dove for The New York TimesA Century Furniture upholstery plant in Hickory. Demand for furniture is booming, and domestic producers are raising prices.Travis Dove for The New York TimesOn a wet morning in late October, the sound of electrical sanders whirring and the steady thunks of a craftsman planing a chair leg echoed through one of Century Furniture’s cavernous warehouses. The factory once housed 600 workers tending assembly lines. Now about 250 busily construct tables, chairs and desks.The plant typically has 2,000 orders in the pipeline, but these days that is more like 4,000, said Brandon Mallard, its manager. Deliveries of ordered furniture used to happen within six to eight weeks; now they can take six months.The same supply chain problems afflicting nearly every industry are also hitting Century. Dresser drawer handles are trapped on container ships somewhere between Vietnam and North Carolina. For some products, imported wood has faced delays.Component delivery dates “just keep moving out,” Mr. Mallard said.Labor has also been a challenge. Employees at Century have been working overtime to catch up with the backlog, but workers burn out, and furniture margins are so thin that paying overtime labor rates can eat into profits. Several of Mr. Shuford’s brands have been raising prices, but because pieces are preordered weeks or months in advance, they have sometimes failed to increase them quickly enough to keep up. The experience in Hickory is a microcosm of what is playing out on a larger scale across the global economy.Jonathan Smith is studying upholstering at the Catawba Valley Furniture Academy. Too few young people are entering the furniture industry to replace those who are retiring. Travis Dove for The New York TimesDemand has bounced back after falling early in the pandemic, fueled by government stimulus checks and savings amassed during the pandemic. Spending has lurched away from services and toward goods, and that mix is only slowly normalizing.The sudden change has thrown a finely balanced global supply chain out of whack: Shipping containers have struggled to get to stockyards where they are needed, container ships cannot clear ports quickly enough, and when imported goods get to dry land, there are not enough trucks around to deliver everything. All of that is compounded by foreign factory shutdowns tied to the virus.With foreign-made parts failing to reach domestic producers and warehouses, prices for finished goods, parts and raw materials have shot higher. American factories and retailers are raising their own prices. And workers have come into short supply, prompting companies to lift their wages and further fueling inflation as they increase prices to cover those costs.Chad Ballard, 31, has gone from making $15 per hour building furniture in Hickory at the start of the pandemic to $20 as he moved into a more specialized role.Mr. Ballard said he came to town four years ago after working construction jobs and at tree services in Florida. He was ready for something more stable and less weather-exposed, and he found it in furniture making. The job has provided stability and enough financial security that he was able to pay off his Jeep and make plans to buy a house with his wife, who also works in the industry.But there is a flip side to some of the factors that are helping to buoy workers like Mr. Ballard: If inflation continues to rise in the hot-demand economy, it will mean rising costs for them and other consumers that eat into paychecks and make it harder to afford everyday necessities like food and shelter. Already, the heating economy means that Mr. Ballard’s goal of buying a house will be slightly tougher. The typical price for a house in Hickory has shot up 21 percent over the past year to $199,187, according to data from Zillow.Fabric and leather templates for furniture designs at a Hancock & Moore factory in Taylorsville, N.C.Travis Dove for The New York TimesBeverly Houston organized pieces of leather as they came off the cutting machine at the Hancock & Moore factory.Travis Dove for The New York TimesAs price increases drag on, economic policymakers worry that consumers and businesses might come to expect sustained inflation and demand steadily higher pay, resulting in a spiral where wages and prices push each other up.There is reason to believe that such a dire outcome can be avoided. Many economists, including those in the Biden administration, believe that demand will eventually moderate as life shifts back toward more normal patterns and consumers spend down their savings, allowing supply to catch up — possibly by the end of next year.Understand the Supply Chain CrisisCard 1 of 5Covid’s impact on the supply chain continues. More

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    Inflation Surged Again in October, With P.C.E. Index Climbing 5 Percent

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    A key measure of inflation showed consumer prices rising at the fastest pace in three decades, as energy prices and demand for goods and services soared, posing a challenge to both the White House and the Federal Reserve.Prices climbed by 5 percent in the 12 months through October, according to Personal Consumption Expenditures price index data released Wednesday. That was the fastest pace of increase since 1990.The gauge was lifted by a 30.2 percent annual increase in the price of energy and a 4.8 percent increase in the price of food. Prices rose 0.6 percent from September to October, as supply chain disruptions continued to clamp down on the availability of certain products and components.Inflation is increasing at its fastest pace in three decades.Personal Consumption Expenditures index, percent change from a year prior

    The Federal Reserve wants inflation to average 2 percent annually over time.Source: U.S. Bureau of Economic AnalysisBy The New York TimesThe increases were in line with what analysts had expected, but the rise in the Federal Reserve’s preferred inflation gauge will only add pressure on the central bank to take quicker action to maintain stable prices.Price increases have shown few signs of fading, as some officials in the Biden administration and at the Fed argued they would earlier this year. The central bank is facing growing calls to hasten plans to end their stimulative bond-buying program and to begin to raise interest rates, a process that could risk slowing job gains and economic growth.While inflation has soured consumer sentiment and weighed on Mr. Biden’s approval ratings, those price increases have been spurred in part by a strong economic recovery. Separate data released by the Labor Department on Wednesday found that initial jobless claims dropped to their lowest point since 1969, falling by 71,000 to 199,000 last week.Mr. Biden hailed the drop in unemployment claims on Wednesday but conceded that the country was still far from a full recovery and that it had to address rising inflation.“We have more work to do before our economy is back to normal, including addressing prices increases that hurt Americans’ pocketbooks and undermine gains in wages and disposable income,” Mr. Biden said in a statement on Wednesday.In an attempt to drive down gas prices, the United States and five other world powers announced a coordinated effort on Tuesday to tap into their national oil stockpiles. Mr. Biden has ordered the Energy Department to release 50 million barrels of crude in the Strategic Petroleum Reserve, lower than what traders had expected from the emergency stockpile, which is the biggest in the world with 620 million barrels.Consumers have grown increasingly concerned about the spike in prices. A survey from the University of Michigan released on Wednesday found that consumers expressed less optimism in November than at any other time in the past decade about prospects for their finances and the overall growth of the economy. The decline in consumer sentiment was a result of the rapid increase in inflation and the lack of federal policies that would address the damage to household budgets, according to the report. More

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    Inflation Batters Pakistan and Puts Pressure on Imran Khan

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    Rising prices and a weakened currency are straining households, intensifying pressure on Prime Minister Imran Khan to find solutions.Muhammad Nazir canceled his daughter’s wedding. He parks his motorcycle at home and walks to his shop. Many of his shelves are empty because he can’t afford to stock the same supply of candy, soft drinks and cookies that he once did.A growing number of his customers can’t buy his snacks anyway. The global inflation wave has dealt a severe blow to Pakistan, a country of 220 million people already struggling with erratic growth and heavy government debt.As the cost of food and fuel eats up a larger share of meager incomes, people are putting pressure on the government of Prime Minister Imran Khan to do something.“I am not making any profit these days,” Mr. Nazir, 66, said from his shop in Sohawa, a town about 50 miles southeast of Pakistan’s capital of Islamabad. “Still, I come here every day, open the shop and wait for customers.”Surging prices have imperiled President Biden’s agenda in the United States and hit shoppers from Germany to Mexico to South Africa. But they are having a particularly nasty effect in Pakistan, a developing country already prone to political instability and heavily dependent on imports like fuel. The effect has been worsened by a sharp weakening of Pakistan’s currency, the rupee, giving it less purchasing power internationally.Pakistan’s economy has been in and out of crisis since Prime Minister Imran Khan came to power in 2018.Didor Sadulloev/ReutersWhile inflation is expected to ease as supply-chain bottlenecks unsnarl, Pakistan feels it can’t wait. On Monday, the government announced that it had reached an agreement with the International Monetary Fund for the first $1 billion of what is expected to be a $6 billion rescue package.“The economy is the biggest threat that the government is in fact facing right now,” said Khurram Husain, a business journalist in Karachi. “This is basically eroding the very basis of their public support.”Protests organized by opposition parties have broken out across Pakistan in recent weeks, causing Mr. Khan’s political allies to examine their loyalties. The Pakistan Muslim League-Q, or P.M.L.-Q, party, which is in a coalition with Mr. Khan, said this month that it was becoming difficult to remain part of the government.“Our members of Parliament are feeling a lot of pressure in their constituencies,” said Moonis Elahi, Mr. Khan’s minister for water resources and a member of P.M.L.-Q. “Some even suggested leaving the alliance if the situation doesn’t improve.”Government officials have downplayed the recent surge in inflation, saying it is a global phenomenon. Mr. Khan has also blamed the foreign debt burden he inherited from the previous government.“The government spent the first year in stabilizing the economy, but when it was close to stabilizing it, the country faced the biggest crisis in 100 years: the coronavirus epidemic,” he said, adding, “No doubt the inflation is an issue.”Officials also cite price comparisons of fuel costs with neighboring countries, like India, claiming that Pakistan is still better off. Pakistanis have seen standard gas prices jump 34 percent in the last six months, to about 146 rupees a liter.Filling up the tank in Peshawar in early November. Pakistan imports a large portion of its oil, diesel and gasoline.Bilawal Arbab/EPA, via ShutterstockPakistan has been rushing to tamp down inflation and get the money it needs to keep buying abroad. Last week, Pakistan’s central bank sharply raised interest rates, a move that could help cool price increases but one that could crimp economic growth.Mr. Khan’s government reached out to Saudi Arabia for a lifeline. The Saudi crown prince, Mohammed bin Salman, pledged $4.2 billion in cash assistance. Members of his government are also chasing loans from China that they say are needed to complete crucial power-sector projects that are part of the $62 billion China-Pakistan Economic Corridor.Pakistan’s economy has been in and out of crisis since Mr. Khan, a former cricket star, came to power in 2018. But other periods of inflation were felt mainly by the rich, economists say. This bad turn is affecting everyone.Inflation surged 9.2 percent in October from the year before, according to government data. Food-price inflation is crushing Pakistan’s poorest residents, who already normally spend more than half of their incomes on food. The cost of basic food items shot up this month by 17 percent year over year, government data show. Pakistan’s biggest food import is palm oil, which has jumped in price.In the United States, food prices have risen 4.6 percent.In terms of energy, Pakistan imports about 80 percent of its oil and diesel and about 35 percent of its gasoline, according to Muzzammil Aslam, a spokesman for the finance ministry. The cost of electricity in Pakistan is already twice as much as in countries like India, China and Bangladesh.“The economy is not well,” Mian Nasser Hyatt Maggo, the president of the Federation of Pakistan Chambers of Commerce & Industry, a Karachi-based industry group, said simply.A charity worker served inexpensive dishes to laborers and others along a roadside in Karachi in June. The government subsidizes the cost of foods like grains, legumes and cooking oil.Asif Hassan/Agence France-Presse — Getty ImagesUnemployment has risen sharply, too, particularly among college graduates in cities. The number of people falling into poverty is up.Understand Rising Gas Prices in the U.S.Card 1 of 5A steady rise. More

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    As Virus Cases Rise in Europe, an Economic Toll Returns

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    A series of restrictions, including a lockdown in Austria, is expected to put a brake on economic growth.Europe’s already fragile economic recovery is at risk of being undermined by a fourth wave of coronavirus infections now dousing the continent, as governments impose increasingly stringent health restrictions that could reduce foot traffic in shopping centers, discourage travel and thin crowds in restaurants, bars and ski resorts.Austria has imposed the strictest measures, mandating vaccinations and imposing a nationwide lockdown that began on Monday. But economic activity will also be dampened by other safety measures — from vaccine passports in France and Switzerland to a requirement to work from home four days a week in Belgium.“We are expecting a bumpy winter season,” said Stefan Kooths, a research director of the Kiel Institute for the World Economy in Germany. “The pandemic now seems to be affecting the economy more negatively than we originally thought.”The Christmas market in Frankfurt, Germany on Monday. Some German states have imposed partial lockdowns.Kai Pfaffenbach/ReutersThe tough lockdowns that swept Europe during the early months of the pandemic last year ended up shrinking economic output by nearly 15 percent. Buoyed by a raft of government support to businesses and the unemployed, most of those countries managed to scramble back and recoup their losses after vaccines were introduced, infection rates tumbled and restrictions eased.In September, economists optimistically declared that Europe had reached a turning point. In recent weeks, the main threats to the economy seemed to stem from a post-lockdown exuberance that was causing supply-chain bottlenecks, energy-price increases and inflation worries. And widespread vaccinations were expected to defang the pandemic’s bite so that people could continue to freely gather to shop, dine out and travel.What was not expected was a series of tough government restrictions. A highly contagious strain — aided by some resistance to vaccines and flagging support for other anti-infection measures like masks — has enabled the coronavirus to make a comeback in some regions.“The lower vaccination rates are, the gloomier the economic outlook is for this winter term,” Mr. Kooths said.Roughly two-thirds of Europe’s population has been vaccinated, but rates vary widely from country to country. Only a quarter of the population in Bulgaria has received a shot, for example, compared with 81 percent in Portugal, according to the European Center for Disease Prevention and Control.A vaccination line in Lisbon. Covid-19 inoculation rates vary widely among European Union countries; Portugal is among the leaders.Patricia De Melo Moreira/Agence France-Presse — Getty ImagesBefore they were ordered shut, stores in Austria were already suffering a 25 percent loss in revenue for November compared with the same period in 2019, the country’s retail trade association said on Monday. Although the last shopping Saturday before the lockdown — stores in Austria are closed on Sunday — was stronger than that day two years ago, the group said, it would not be enough to make up for the losses expected in the coming weeks.Hotels were not faring much better in the week before the start of the lockdown, with one of every two bookings canceled, Austria’s hotel association, Ö.H.V., said.Still, the overall outlook is not nearly as dire as it was last year. Although several analysts have shaved their forecasts for October, November and December, growth is still expected to be positive, with the yearly increase hovering around the 5 percent mark. Jobless rates have dropped and, in some areas, businesses are complaining of labor shortages.Austria’s response, to impose a three-week lockdown — which shuts all stores except those providing basic necessities, allows restaurants to serve only carryout and requires people to stay home except for essential activities — is not necessarily a bellwether of what other governments across Europe will do. Leaders in France and Britain signaled last week that they were not planning new shutdowns.“We’re not at that point,” Sajid Javid, the British health secretary, said on Sunday. While there can’t be complacency, he added that he hoped people could “look forward to Christmas together.”Claus Vistesen, chief eurozone economist at Pantheon Economics, said that while it was clear that restrictions and lockdowns had a significant and immediate impact on the economy, limited and intermittent closings — like those that already exist in some countries — were less likely to put a huge dent in overall growth.Rising infection rates will also push concerns over inflation — at least in the near future — “a little bit into the background,” he said.Much more difficult to assess, though, are the consequences of widespread restrictions on the unvaccinated or vaccine mandates.For individual businesses and regions, however, even the current limits could prove devastating.Restaurants in Austria will allow only carryout service.Laetitia Vancon for The New York TimesThe weeks leading up to Christmas Day are among the most important shopping days in Austria and Germany, where people gather at outdoor markets to eat, drink and buy gifts. The region’s traditional holiday markets, which normally open from late November until Dec. 24, are also an important tourist draw, and generate wider revenue through hotel bookings and other cultural events.Last year, many markets were completely shut down, so sellers and buyers were looking forward to this year.In Vienna, the market on Maria Theresien Platz opened on Wednesday, its wooden stalls decorated with evergreen boughs and fairy lights. But the vendors were forced to shut down after only four days.Maria Kissova stood amid piles of tablecloths, pillow covers and lace ornaments she had brought in from neighboring Slovakia, where she employs several women to sew the crafts. This year was her first time coming to Vienna, a trip that required months of planning and paperwork. With the lockdown, she faced the prospect of only several days’ worth of shopping, if the market is allowed to reopen as planned in mid-December.“It was a shock” when the lockdown was announced, she said, adding that it was too early to predict the scale of the losses she could incur. “We just have to accept it.”For Daniel Zieman, who ran a gift stand across the square between Vienna’s Natural History and Art History Museums, the story was the same. But he worried about the staff at the restaurant serving typical Austrian fare that he runs on the edge of town, many of whom count on the tips coming in from waiting tables in the normally busy season. Lost tips won’t be included in the government subsidies that will help keep people afloat.“Many of our staff have children, and you count on a certain percent from these tips every month,” he said. “That won’t be there.”The holiday season is when many restaurants do their biggest business, with companies holding end-of-year events, he said. “That is really good business, with 30 to 40 people who eat and drink and drink again and eat again. It’s a real shame,” he said.The Czech Republic and Slovakia have also imposed new restrictions. In Germany, some states have introduced partial lockdowns, and starting Wednesday, the unvaccinated will be required to show a negative Covid test before going to work.By the end of this winter, pretty much everyone in Germany “will be vaccinated, cured or dead,” Jens Spahn, the health minister, said on Monday.A nationwide closure in Germany, the continent’s largest economy, is unlikely at the moment, but Carl B. Weinberg, chief economist at High Frequency Economics, warned that one there would drag down all of Europe. “If Germany locks down, Europe is going to go back into recession,” he said.In France, Europe’s second-largest economy, President Emmanuel Macron is loath to reverse economic gains when a major election is scheduled in April. Despite warnings by health experts that another wave of coronavirus is hitting France “with lightning speed,” Mr. Macron said last week that he wouldn’t close parts of the economy again or follow Austria.Nearly 70 percent of the French population has been double vaccinated, and the country imposed a health pass earlier this year requiring people to show proof of vaccination to travel on trains and planes and enter restaurants, cinemas and large shopping centers.The government will now require a booster dose for people 65 or older for the pass to remain valid, and France’s Health Defense Council will meet on Wednesday with Mr. Macron to discuss other options to slow the spread of the coronavirus.The government, a spokesman said this week, is bringing “the weight of restrictions to bear on nonvaccinated people rather than vaccinated people.”Liz Alderman More

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    U.K. Inflation Hits a 10-Year High

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    Inflation in Britain rose to its highest level in nearly a decade in October after soaring energy prices hit household bills.The Consumer Price Index rose to 4.2 percent from a year earlier, the highest since November 2011, and up from 3.1 percent in September, the Office for National Statistics said on Wednesday. The price increases were more than twice the central bank’s target of 2 percent, increasing the likelihood that policymakers will go ahead with the interest rate increases they have signaled are coming.The biggest contributor to higher inflation was a surge in energy costs, including wholesale natural gas, which has caused nearly two dozen energy suppliers in Britain to collapse and disrupted manufacturers. The cap on energy bills, which protects about 15 million households, was raised 12 percent sharply in October.Other large contributors were higher prices for gasoline and at hotels and restaurants, the statistics agency said.The Bank of England has said it expects inflation to peak at about 5 percent in the spring. “This period of higher inflation is likely to be temporary,” Andrew Bailey, the central bank’s governor, said this month. But there was “no fixed unit of time” that defines transitory, he said.The central bank said that “it would be necessary over coming months” to raise interest rates if the economic data played out as policymakers anticipate, especially if the end of the government’s furlough program doesn’t result in a large increase in unemployment. In the three months through September, the unemployment rate was 4.3 percent, 0.2 of a percentage point lower than in the three months through July, and early payroll data indicated that only a small number of people lost their jobs in October when the furlough program expired.As the global economy emerged from successive lockdowns over the past year, supply bottlenecks, labor market shortages and other shortages have disrupted supply chains around the world. Policymakers are now warning that the supply problems and the higher prices that result will last longer than they initially expected, adding pressure on central bankers to act more aggressively to stop inflation from getting out of their control.In the United States, the Consumer Price Index jumped to 6.2 percent in October, the fastest annual increase since 1990, and prices rose 4.1 percent in the eurozone last month, the fastest in 13 years. In China, the prices wholesalers pay to producers climbed to the highest in 26 years amid rising commodity prices and power shortages. More

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    Inflation Drives Sharp Downturn in Consumer Sentiment

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    Americans have turned decidedly gloomy about their financial outlook, and inflation is the main cause of the anxiety, according to a survey released Friday.The University of Michigan reported that its survey of consumer sentiment fell to its lowest level in a decade in early November. It attributed the decline to “the growing belief among consumers that no effective policies have yet been developed to reduce the damage from surging inflation.”Hampered by supply chain disruptions and labor shortages in some industries, the economy has been straining under rising prices. The government this week reported the steepest inflation in 31 years, with a 6.2 percent increase in prices in October from a year earlier.In the Michigan survey, “rising prices for homes, vehicles and durables were reported more frequently than any other time in more than half a century.” But inflation is hardly limited to big-ticket purchases — food items like meat are getting more expensive, driving up the cost of preparing Thanksgiving meals.Many policymakers have assumed that higher inflation would be transitory, a result of the uneven reopening of the economy after widespread shutdowns because of the coronavirus pandemic.Investors, too, have shrugged off the threat of inflation, even though it can erode the value of financial assets. Bond yields, which move higher in times of inflation, remain low by historical standards. And the stock market is near record highs, despite the uptick in prices lately.But the Michigan survey is a sign that consumers are beginning to feel pinched. The survey reflected a downturn in assessments of both current conditions and economic prospects.“Consumers are angry about inflation,” said Diane Swonk, chief economist at the accounting firm Grant Thornton in Chicago.“Inflation will get worse before it gets better,” Ms. Swonk said. “It could moderate by the spring of 2022, and it does affect how people feel about the economy.”But consumers in the United States continue to spend at robust levels, she said, and the odds look good for a robust holiday shopping season. More