Daily Brief: US Inflation Hasn't Looked This Ridiculous Since The 1980s

Daily Brief: US Inflation Hasn't Looked This Ridiculous Since The 1980s

about 2 years ago3 mins

Data out on Wednesday showed that US consumer prices rose at their fastest pace last month since the early ‘80s, but who you gonna call?

What does this mean?

US consumer prices were 7% higher in December than they were the same time the year before – the biggest jump in 39 years and up on November’s 6.8% gain. And sure, energy and food prices were up by 29% and 6% respectively. But if your latest bank statement made you wince, it’s not just because you filled up on snacks and cranked up the heating in December: clothing, rent, and used cars were all much more expensive too, rising by around 6%, 4%, and 37% respectively. That might go some way to explaining why core inflation – which strips out unstable food and energy prices – rose by the most since 1991.

Consumer prices

Why should I care?

For markets: “All win, no lose.”

This data will only fuel expectations that the Federal Reserve (the Fed) will start raising interest rates as soon as March to keep rising prices in check. Still, it’s been trying to put everyone’s minds at rest: the central bank said this week that it can bring down inflation without interrupting economic growth, since plenty of the pandemic-driven shortages should ease on their own. In other words, it mightn’t need heavy-handed rate hikes to do all the work. Investors seemed reassured, sending the US stock market up and putting an end to its five-day losing streak.

Peak inflation

The bigger picture: The Fed’s setting an example.

The US isn’t alone: data out from the OECD – an intergovernmental economic organization – showed average inflation across the world’s richest economies was 5.8% higher in November than the same time in 2020. If that trend continues, other central banks could be forced to follow the Fed’s lead and raise rates this year too.

Inflation rich countries

Keep reading for our next story...

US Oil Production Is Set To Hit A Record High Next Year

Oil image

The US just can’t move on from its first love: the Energy Information Administration (EIA) said this week that the country’s set to produce more oil in 2023 than it did before the pandemic.

What does this mean?

Between Covid-fueled hardship and a push toward greener energy, America’s oil industry was starting to look like its glory days were behind it. Then the slippery elixir's price jumped more than 50% last year on the back of resurgent demand, and oil companies were able to start plowing money back into their businesses. America’s producers were no exception, so much so that the EIA – a US organization that tracks industry statistics – now thinks they’ll produce a record 12.4 million barrels a day by 2023. There might be one difference this time around: analysts are expecting smaller producers to drive output, as America’s energy giants prioritize spending their cash on share buybacks and dividend payouts.

US oil

Why should I care?

For markets: How to lower inflation.

The extra oil should, all else equal, push the dusky nectar’s price down, with the EIA forecasting a drop in the price of Brent oil – a key oil benchmark – from $85 today to an average of $75 this year, and $68 next. That should bring down energy prices more widely, which should – given energy’s oversized influence on overall prices – help limit inflation around the world.

EIA oil

The bigger picture: So much for those green ambitions.

The US can’t really complain about the possibility of lower prices, but it mightn’t be particularly happy if higher oil production is responsible. The country’s recently been investing billions into clean energy technology, and it looks like there's a lot more work to be done: the EIA said it’s expecting American carbon emissions to climb 1.8% this year and 0.5% in 2023.

Finimize

BECOME A SMARTER INVESTOR

All the daily investing news and insights you need in one subscription.

Disclaimer: These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment advisor.

/3 Your free quarterly content is about to expire. Uncover the biggest trends and opportunities. Subscribe now for 50%. Cancel anytime.

Finimize
© Finimize Ltd. 2023. 10328011. 280 Bishopsgate, London, EC2M 4AG