High prices continue to hit American shoppers as inflation increased to 7.5% for the month of January on an annualized basis, exceeding the 40-year high set just the month prior.
The latest release of the monthly Consumer Price Index by the Bureau of Labor Statistics shows that price increases were most pronounced in food, electricity, and shelter.
The indexes for food and energy each rose 0.9%, and the index for shelter rose 0.3%.
The so-called “core” consumer price index, minus the more volatile food and energy indexes, rose 0.6% in January, the same as in December.
Indexes for household furnishings and operations rose 1.3%, used cars and trucks increased by 1.5%, medical care went up 0.7 %, and apparel increased by 1.1%.
The rise in consumer prices appears to be sticking around, despite earlier claims by the Federal Reserve Chair Jerome Powell that the effects would be transitory.
Throughout the pandemic, as demand soared and shifted, snarling supply chains and backing up ports, manufacturers have raised prices across the marketplace, from food to home goods to car parts.
But as annual supply contracts began to be renegotiated in the fourth quarter, major manufacturers are not just passing along increased input, labor and transportation costs to consumers, they’re also increasing their profit margins.
Amazon, Disney, Mattel, and Starbucks and other major consumer-facing companies recently announced likely price increases for 2022.
Consumers with pent-up demand, increasing access to loosening credit, and savings in the bank, have largely shrugged off these hikes and kept up their appetite for swiping and shopping.
“Despite heroic efforts and a record year of production, we were unable to keep pace with accelerating consumer demand,” Michele Buck, Chief Executive Officer and Chairman, said during an earnings call last week. Like many manufacturers, the company is trying to add more labor and production capacity, adding four lines during the last year, but cited Omicron as increasing worker absenteeism and slowing output. The hamstringing will persist “until the second of the year,” she said. In the meantime it would be “optimizing our promotional calendar.”
Manufacturers slashed coupons and promotions following the spike in demand when the pandemic hit in March. They have since eased some promotions back but they still haven’t returned to pre-pandemic levels.
The question is how long they can stomach the price increases. According to a new survey of adult Americans by financial site eMoney, gas prices, the ability to pay bills and inflation were their top three concerns for 2022.
“Major economic issues are affecting Americans every day, from high gas prices to inflation,” said Celeste Revelli, the site’s Director of Financial Planning, in a statement. “Concerned about their families’ futures, people now more than ever are looking for ways to prioritize their responsibilities and achieve financial peace of mind.”