RECORD INFLATION: The highest price increase in the US since 1982, and in Germany since 1992

Consumer prices in the US rose last month at the fastest annual pace in nearly 40 years, highlighting how rapid and persistent inflation is eroding wages and increasing pressure on the Federal Reserve to tighten monetary policy, Bloomberg reports.

The Consumer Price Index (CPI) increased by 6.8 percent compared to November 2020, according to data released today by the Department of Labor. The standard measure of inflation rose by 0.8 percent compared to October, exceeding forecasts and extending the trend of significant increases that began earlier this year.

Overall inflation in November in the US rose the most since 1982 on an annual basis. The CPI increase reflects significant progress in most categories, similar to last month’s report. Gasoline, housing, food, and vehicles were among the largest contributors to the rise compared to the previous month.

The data reinforces expectations that the Fed will accelerate the tapering of its bond-buying program at the central bank’s final meeting next year. Central banks — and politicians — around the world are under increasing pressure to address rising inflation as workers spend more in stores and at the gas pump.

The figure 'only maintains pressure on the Federal Reserve', said Kathy Bostjancic, chief US financial economist at Oxford Economics, to Bloomberg TV.

– Inflation will 'remain hot and sticky during the first quarter' – Bostjancic said.

Looking ahead to next year, supply chain challenges will continue to drive prices in the near future, but they are expected to fade as Americans shift towards more normal consumption patterns. However, other factors, such as labor shortages and housing costs, may keep inflation elevated.

Record inflation is not just in the US. It was announced today that annual inflation in Germany in November exceeded five percent, primarily due to a low comparative base and higher energy and food prices, confirmed the latest data from Destatis.

Consumer prices in November rose by 5.2 percent year-on-year, following a 4.5 percent increase in October, reported the German statistical office, in line with the first estimate from the end of November.

– The inflation rate has risen for the sixth consecutive time and reached its highest level this year in November – said Georg Thiel, president of Destatis.

– A higher inflation rate was measured nearly 30 years ago. In June 1992, it was 5.8 percent – Thiel added.

On a monthly basis, consumer prices fell by 0.2 percent, after a 0.5 percent increase in October, primarily due to a seasonal decline in package tour prices, by 21.6 percent. Energy prices rose by 1.8 percent, and food prices by 0.5 percent compared to the previous month.

Annual inflation measured by the Harmonized Index of Consumer Prices (HICP), which is used for easier comparison with other EU countries, reached six percent in November and is the highest since 1992 when it reached a record 6.2 percent. In October, it was 4.6 percent.

Several reasons for high inflation in the largest European economy since July this year include low prices last year that resulted in a low comparative base, explain Destatis.

They also point to the reduced value-added tax (VAT) rate in the second half of last year and the sharp drop in mineral oil product prices a year ago. Year-on-year, energy prices jumped by 22.1 percent in November, following an 18.6 percent jump in the previous month. Heating oil prices have more than doubled, and motor fuel has increased by more than 40 percent.

The CO2 charge introduced at the beginning of the year has also affected the rise in energy prices, notes the German statistical office. The annual increase in food prices accelerated to 4.5 percent, up from 4.4 percent in October, and the increase in service prices rose from 2.4 to 2.8 percent, reported Destatis.