As Another Key Inflation Gauge Sets 40-Year High, Average U.S. Households Will Pay $5,200 More in 2022

Food & Energy costs, which includes Gasoline & Home Heating, account for $2,200 of 2022’s inflation​​​​​

WASHINGTON, D.C. (Texas Insider Report) — The measure of inflation reported by the U.S. Commerce Department Thursday was the largest year-over-year increase in 40 years – since January 1982. An inflation gauge closely monitored by the Federal Reserve Bank jumped 6.4% in February compared to a year ago, with sharply higher prices for food, gasoline and other necessities squeezing Americans' finances.

On a monthly basis, prices rose 0.6% from January to February, up slightly from the previous month’s increase of 0.5% – and matching the highest monthly figure since 2008. 

Gas prices have soared in the past month as well. The cost of a gallon of gas shot up to a national average of $4.24 a gallon Wednesday, according to AAA – a .63 cent increase from just a month ago when the price per gallon was $3.61.

Michael Pearce, an economist at Capital Economics, estimated that the gas price spike alone will cost Americans an annualized $100 billion in March. That hit to family's pocketbooks could force many Americans to dig into their savings to cover the higher gas costs in the near term, he said.
 
And, economist say that this and other measures of inflation will likely worsen in the coming months because Thursday's report doesn't reflect the consequences of Russia's invasion of Ukraine, which occurred Feb. 24th. The war has disrupted global oil markets and accelerated prices for wheat, nickel and other key commodities.

Squeezed by inflation, consumers increased their spending by just 0.2% in February – and after being adjusted for inflation, spending actually fell 0.4% last month. 
 

• Food costs climbed 1.4% last month, the most in nearly two years.
• Energy costs spiked 3.7%, the biggest such increase since October.

The Federal Reserve responded to the inflation surge by raising its benchmark short-term interest rate by a quarter-point in March, and it's likely to keep raising it well into next year. Because its rate affects many consumer and business loans, the Fed's rate hikes will make borrowing more expensive and could weaken the economy over time.

Michael Feroli of JPMorgan is among economists who now think the Fed will raise its key rate by an aggressive half-point in both May and June. The central bank hasn't raised its benchmark rate by a half-point in two decades, a sign of how concerned it has become about the persistent surge in inflation.

Inflation Increase Will Cost Average U.S. Household an Additional $5,200 in 2022

“Inflation will mean the average U.S. household has to spend an extra $433 per month compared to last year for the same consumption basket,” wrote Bloomberg economists Andrew Husby and Anna Wong after the government's announcement that inflation reached a 40-year high in January, accelerating to a 7.5% annual rate.
 
Inflation gauges such as the Consumer Price Index – which measures what consumers pay for goods and services – have already recorded prices soaring at the highest rate since 1982.

This January’s rate of 7.5% topped December’s 7% annual rate, with both figures well above the 1.8% annual rate for inflation in 2019 during the Trump Administration.

Thanks to Bidenomics, prices have increased sharply for several everyday household items, including food, cars, housing and electricity.

The Food & Agriculture Organization of the United Nations (FAO) found that food prices in January reached record highs. This was according to the Food Price Index, which has increased by 20.7% since February 2020, according to a report which was submitted before the conflict in Ukraine expanded.

Food and energy costs, which includes gasoline and home heating, account for $2,200 of 2022’s inflation, the Bloomberg Economics team said.

On March 24th, Biden warned that food shortages could be imminent as a result of sanctions imposed on Russia by the U.S. and its allies. Biden made the remarks during a press conference at a NATO summit in Brussels.
 
Russia and Ukraine produce 25% of the global wheat supply, according to the Observatory for Economic Complexity. While neither of these countries export wheat to the U.S. directly, their absence from the global market is expected to strain supply and push prices higher.