Consumer Prices Soared 7.5% Over the Past 12 Months, Most Since 1982

AICC, through its membership in the Council of Manufacturing Associations, is pleased to present the "Monday Economic Report" from the NATIONAL ASSOCIATION OF MANUFACTURERS (NAM).

By Chad Moutray, Ph.D., CBE – February 14, 2022

NAM Weekly Economic Toplines: 

Consumer prices rose 0.6% in January. Food and energy prices both soared 0.9% in January, but with gasoline costs down 0.8%. Excluding food and energy, core consumer prices increased 0.6% in January, also matching the rate in December.  The consumer price index has risen 7.5% over the past 12 months, up from 7.1% in December and the fastest year-over-year pace since February 1982. At the same time, core inflation (which excludes food and energy) increased 6.0% year-over-year in January, up from 5.5% in the prior release and the biggest increase since August 1982. Overall, prices are predicted to continue growing by more than consumers have become accustomed to in recent years. Even with some deceleration over the course of this year, core consumer inflation should still be rising around 3.5% year-over-year by the end of 2022. For its part, these data will put continued pressure on the Federal Reserve to tackle inflation. The Federal Open Market Committee has already said that it will end all asset purchases by early March, and it will likely start reducing its balance sheet over the summer. In addition, the FOMC will almost certainly increase short-term rates at its March 15–16 meeting, perhaps by 50 basis points (but at least by 25 basis points). The Index of Consumer Sentiment declined from 67.2 in January to 61.7 in February, the lowest reading since October 2011, according to preliminary data from the University of Michigan and Thomson Reuters. Americans felt more pessimistic about both current and future economic conditions, largely on inflation worries. The National Federation of Independent Business reported that the Small Business Optimism Index declined to 97.1 in January, an 11-month low. Supply chain disruptions, workforce shortages, inflation and COVID-19 continue to challenge small business owners. Respondents cited difficulties in finding workers as the top “single most important problem,” followed by inflation. In the NFIB survey, the net percentage of respondents reporting higher prices today than three months ago rose from 57% to 61%, the highest rate since the fourth quarter of 1974. At the same time, the net percentage of respondents saying they had increased compensation in the past three months rose from 48% to 50%, a new record. The U.S. trade deficit rose to $80.73 billion in December, which was just shy of the all-time high of $80.81 billion recorded in September. The U.S. trade deficit reached an all-time high of $859.13 billion in 2021, up from $676.68 billion in 2020. The goods trade deficit increased to $101.43 billion in December, a record high, with goods imports jumping to $259.70 billion, also an all-time high. Goods exports rose to $158.27 billion, which was not far from October’s record pace ($159.01 billion). At the same time, the service-sector trade surplus improved to $20.70 billion, the strongest reading since May.  U.S.-manufactured goods exports totaled $1,133.25 billion in 2021, using non-seasonally adjusted data, soaring 18.91% from $953.02 billion in 2020. Likewise, manufactured goods imports grew 19.08% from $2,068.29 billion in 2020 to $2,463.03 billion in 2021. READ FULL REPORT