A key inflation measure rose at the fastest pace since 1982
![<i>Michael Reynolds/EPA-EFE/Shutterstock</i><br/>A key measure of inflation rose 5.8% between December 2020 and December 2021](https://abc17news.b-cdn.net/abc17news.com/2022/01/hypatia-h_cc3a3828ee93f0d3116fc9e35244d645-h_82de1474d2651aee38436a9316f4cb0c-300.jpg)
A key measure of inflation rose 5.8% between December 2020 and December 2021
By Anneken Tappe, CNN Business
A key measure of inflation rose 5.8% between December 2020 and December 2021, the Bureau of Economic Analysis reported Friday.
It was the biggest advance since 1982.
Energy prices alone rose nearly 30% over the course of 2021, while food prices climbed 5.7%.
Stripping out those two components, the core consumer price index — which is the Federal Reserve’s preferred measure of inflation — rose 4.9% in the 12 months to December. That was the fastest price hike by that measure since 1983.
For the month of December alone, prices rose 0.4% — a decline from the 0.6% in both October and November. Core prices advanced 0.5%, the same amount as in November.
While prices rose, so did American incomes — albeit at a slower pace. Personal incomes increased by 0.3%, or $70.7 billion in December, while disposable incomes increased only 0.2%, or $49.9 billion.
That means inflation is wiping out the gains people got in their paychecks: Adjusted for inflation, “real” disposable incomes fell by 0.2%, “extending a long string of declines due to stubbornly high inflation,” according to Sal Guatieri, senior economist at BMO.
Americans also spent less in December, and consumer spending actually declined for the first time in months, slipping 0.6%. Real spending fell by 1%.
Retailers had warned customers of supply chain disruptions and shortages, effectively pulling the holiday shopping season into November.
“With retailers doing a good job of restocking store shelves late last year, supply will be somewhat less of an issue, it’s hoped,” Guatieri said
But the fallout from the rapid spread of the Omicron variant will probably make the start to 2022 a rocky one, also because of the expiry of the extra child tax benefits, he added.
“Consumer spending will struggle to post any growth in [the first quarter] given the weak handoff, though it should rebound in [the second quarter] with support from high savings,” Guatieri predicts.
This is important for the recovery, which could be hamstrung by Omicron at the start of the year — especially because consumer spending is such a big factor in US economic growth.
The-CNN-Wire
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