Bay Area consumer prices skyrocketed at their highest pace in more than 20 years, an increase fueled by a surge in a wide array of costs, a grim new report revealed on Thursday.
Consumer prices, which measure the inflation rate, jumped by an annual rate of 5.2% in the Bay Area, the region’s highest year-to-year increase since June 2001, the Bureau of Labor Statistics reported.
Nationwide, the inflation rate was 7.8%, the biggest rise for consumer prices since 1982 — a four-decade high for the United States.
In the Bay Area, gasoline, electric and gas utility services, food consumed at home, meat and fish, cereal, bakery products, dairy products and used cars represented some of the propellants for the region’s head-spinning rise in inflation, according to the government report.
“This inflation is a long-term problem, it is not going away for a while,” said Christopher Thornberg, an economist and founding partner of Beacon Economics. “Inflation is not transitory.”
Ominously, the inflation report didn’t measure the spike in gasoline prices that has erupted in the wake of Russia’s invasion of Ukraine, since the government’s latest survey of consumer costs occurred in February.
“The worst is yet to come,” Sung Won Sohn, a professor of finance and economics with Loyola Marymount University, wrote in a research note on Thursday. “This report was compiled before the invasion of Ukraine by Russia. Gasoline and other commodity prices soared since then.”
Sohn also cited reports that consumers have begun to scale back spending, or at least purchases conducted in person.
“A Bloomberg survey shows that the foot traffic at retail stores has already dropped 5.6% from a year ago,” Sohn stated in the research note.
The price of unleaded regular gasoline in the Bay Area soared by 36% during the one-year period that ended in February, the government report disclosed.
Other huge increases included a jump of 39.7% for used vehicles. However, the cost of new vehicles inched higher by only 1.5%.
Food prices zoomed higher by 9%, led by a mammoth increase of 10.7% for meat, poultry, fish and eggs; and a jump of 13.7% for cereal and bakery products.
The cost of food consumed at home soared 12.1% higher, while the price of food consumed away from home rose only 5.7%. Of course, going to a restaurant might typically require people to put gas in their car for the dining event.
For people spending a lot of time at home, the cost of utility services — such as the electricity and gas provided by PG&E — hopped higher by a huge amount.
The price of natural gas piped into the home rocketed 32.6% higher, while electric utility costs jumped 15.4%.
“Over the next two or three years we’re are going to see higher inflation on top of what we are seeing now,” Thornberg said.
In order to wring inflation out of the nation’s wobbly economy, the Federal Reserve might be forced to ratchet up interest rates to a brutally high level.
“You have to kill inflation with higher interest rates,” Thornberg said. “The last time that occurred, the rising interest rates caused a nasty economic downturn.”
Normally, high jobless rates and huge job losses don’t occur at the same time. That might not be the case this time, some economists warn.
The U.S. might have to confront a stagnant economy and rising inflation simultaneously.
“Stagflation is here and the economic outlook could get even worse,” Sohn said. ”
Four decades ago, a double whammy of inflation and job losses battered the nation’s economy. A similar specter now looms.
“We are heading to a repeat of the late 1970s and early 1980s,” Thornberg said. “It’s going to look a lot like that time period.”
Source: www.mercurynews.com