U.S. Inflation Broadens as Two-Thirds of Index Jumps 4% or More
U.S. Inflation Broadens as Two-Thirds of Index Jumps 4% or More
(Bloomberg) -- U.S. inflation isn’t just getting higher. It’s also getting wider.
That’s the takeaway from analysis of the diffusion indexes for consumer prices, after Thursday’s report by the Bureau of Labor Statistics showed inflation climbing to a fresh four-decade high.
The headline rate rose to 7.9% in January from 7.5%, with further increases likely to follow after Russia’s war in Ukraine sent commodity prices soaring. But the broadening of inflation is also troubling for the Federal Reserve as it prepares to start raising interest rates.
Last month, almost two-thirds of the Consumer Price Index -- weighted by how much Americans typically spend on each component -- rose at a rate of 4% or faster, compared with less than half in January. The share of items that went up by more than the Fed’s 2% inflation target rose to 91%, according to analysis using the Bloomberg BQNT application.
The diffusion indexes are based on the share of the consumer shopping-basket that’s rising or falling by more than a specified amount -- using a three-month moving average to smooth out the change.
That shows how inflation is taking hold across the economy, not just in the categories that have drawn the most headlines, like used cars, gasoline and housing.
“In the absence of a slowdown in shelter costs, to get down to anywhere near the Fed’s target for core inflation, everything else is going to have to be close to flat,” Stephen Stanley, chief economist at Amherst Pierpont Securities, said in a note. That’s “a prospect that is not even remotely conceivably any time soon.”
Only a few corners of the economy have escaped the growing price pressures.
Food provided at schools and workplaces, as they struggle to get back to full attendance, is one of them. That sub-index fell 41% over the past year, the BLS said, “reflecting widespread free lunch programs.”
Tenant and household insurance is another area where price gains have been subdued in recent months. And measured at a one-month annualized rate, used cars and trucks fell by almost 3% in February.
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