Inflation Hits 7%, Highest Level in 40 Years

Inflation rose 7% over the last year, the highest level in 40 years, the Bureau of Labor Statistics said in its Consumer Price Index (CPI) report Wednesday (Jan. 12).

Month-to-month, the CPI rose 0.5%, the bureau said. Setting aside prices for food and energy, so-called core CPI rose 5.5% from 2020 to 2021 and 0.6% from the November to December.

Last month’s CPI report saw inflation hit a 39-year high, with the consumer price index up 6.8% from November 2020, as consumer demands remained high for products in the middle of ongoing supply chain slowdowns.

Read more: Inflation Hits 39-Year High With CPI up 6.8%

The biggest gain came from energy costs, although the increase was slightly below last month’s pace, posting a 29.3% annual jump in December on the heels of a 33.3% move in November.

But inflation ramped up for other sectors, including shelter (4.1% compared to 3.8%), food (6.3% compared to 6.1%), and medical services (2.5% compared to 2.1%), new vehicles (11.8% vs. 11.1%) and used vehicles (37.3% compared to 31.4%).

The cost of used cars and trucks has been one of the major drivers of inflation, due supply chain constraints. At the end of last year, the vehicle valuation service Kelley Blue Book (KBB) reported that the average used car price topped $27,000 for the first time.

KBB noted that this price was “a jaw-dropping 41% higher than in November of 2019, the last month before COVID-19 was first detected and knocked the world’s economy off its track.

See also: High New and Used Car Prices Keeping Pedal to the Metal Until Production Catches Up

Inflation soared last year thanks to a variety of factors, including supply chain constraints caused by the pandemic, a spike in energy costs, labor shortages and increased demand.

According to the Bureau of Labor Statistics, inflationary pressures are expected to extend into at least the middle of the year. Federal Reserve Chairman Jerome Powell recently pledged to take the necessary steps to curb inflation, including increasing interest rates.