US inflation gauge sees biggest rise in nearly 40 years | Business and Economic News

Personal consumption expenditure, the measure of inflation, rose by 5.7 percent in November compared to the same period last year.

Take out your cassette tapes and your Sony Walkman, because the U.S. economy is experiencing a full-blown moment in the 1980s.

Personal consumption spending, a measure of inflation below the U.S. economy, rose 5.7 percent in November from the same period a year ago, the U.S. Department of Commerce said Thursday. That’s the biggest peak of PCE for almost 40 years.

Compared to the previous month, PCE rose 0.6 percent in November, after rising 1.4 percent in October.

Excluding food and volatile energy, core PCE rose 4.7 percent in November from the same period a year ago.

PCE is a carefully watched metric, as consumer spending drives roughly two-thirds of growth in the world’s largest economy. It is also the preferred reserve measure of the Federal Reserve.

Thursday’s Trade data indicated that higher prices could weigh on consumer spending. Americans reduced their purchases of goods and spent more on services last month, with personal income adjusted for inflation falling 0.2 percent in November compared to the previous month.

And while the start of the holiday shopping season in early October could have resulted in lower consumer spending in November, compared to October, economists see price pressures playing a big role.

“Consumer spending has risen moderately 0.6% in the last month, driven entirely by service spending. But inflation continues to take a toll on consumers’ wallets as real spending has been disappointing when adjusted for high prices,” said Kathy Bostjancic, Oxford Economics US Chief Financial Officer.

The PCE data was expected to be more serious after the U.S. Department of Labor announced this earlier this month Consumer Price Index It rose by 6.8% in November, the largest increase in almost 40 years.

For most of this year, the Federal Reserve has approved a rise in inflation to prioritize the return of Americans to work.

But this year’s price hike caused by silent supply chains and the shortage of raw materials and workers stemming from the pandemic disruption has been more persistent than initially expected by the Fed.

Moreover, although the labor market needs to recover all the jobs lost due to last year’s pandemic blockade, the unemployment rate is rapidly closing at 3.5 per cent before the pandemic. The US economy has one today almost a record number of job offers. And American workers feel so confident about their job opportunities that they’re saying “I’m leaving” in record numbers.

Economists have questioned what lies behind the U.S. labor shortage, but fears of hiring COVID-19, early retirement baby boomers and workers unleashing the entrepreneurial spirit to start their businesses are believed to be factors. .

In the face of a labor market plagued by demand and inflation as in 1982, the Fed announced this month that it intends to turn monetary policy around to keep up with price pressures.

At the end of the last annual policy meeting, the Fed said it would speed up the dismantling of pandemic recovery measures. has released new screenings asking for a three-year interest rate hike next year.