US inflation reaches 40-year high

Consumer prices jumped 7.9% from a year earlier, propelled by surging costs for food, petrol and housing

Robust consumer spending, solid pay rises and persistent supply shortages in addition the conflict in Ukraine have sent US consumer inflation to its highest level in four decades. AFP

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Consumer inflation in the US jumped to a 40-year high of 7.9 per cent over the past year, propelled by a spike in costs for food, petrol and housing.

The increase reported on Thursday by the Labour Department reflected the 12 months ending in February and did not include most of the oil and petrol price increases that followed Russia’s invasion of Ukraine on February 24.

"Today’s inflation report is a reminder that Americans‘ budgets are being stretched by price increases and families are starting to feel the impacts of [Russian President Vladimir] Putin’s price hike," US President Joe Biden said in a statement.

Petrol prices across country continue to soar. The average US driver will spend $4.31 per gallon on Wednesday, the American Automobile Association reported.

Various grades of petrol, with prices above $7 per gallon, are displayed at a Chevron gas station in downtown Los Angeles, California. AP

Petrol prices are displayed at an Exxon gas station behind American flag in Edgewater, New Jersey. Reuters

Drivers in Hawthorne, California wait in line to pump fuel as the price of regular petrol reaches above $5.89 a gallon and premium fuel tips over $6 per gallon. AFP

'Any good news please' sign seen along with a price for a gallon of petrol at a service station in Denver, Colorado. AP

Two people wearing masks stand in front of a sign showing the price of petrol outside of a service station in Washington. AFP

A sign displays petrol prices as a vehicle departs a Shell station in Washington. AFP

A person takes photographs of petrol prices at a Shell station in Los Angeles, California. AFP

An attendant walks past a pump at a station selling petrol at almost $7 a gallon in Los Angeles, California. AP

A driver holds a fuel nozzle at a Shell station in San Francisco, California. Bloomberg

Two people wearing masks walk in front of a sign showing the price of petrol outside of a station as prices reach record highs in Washington. AFP

An electrical contractor repairs a sign with petrol prices in Los Angeles, California. AFP

Cars drive near a petrol station in Washington. AFP

Petrol prices are advertised at almost $7 a gallon in Los Angeles, California. AP

Even before the war further accelerated price increases, robust consumer spending, solid pay rises and persistent supply shortages had sent US consumer inflation to its highest level in four decades.

Mr Biden announced this week that the US would immediately ban importing Russian oil and other energy supplies, warning that the move would hurt at the pump.

"As I have said from the start, there will be costs at home as we impose crippling sanctions in response to Putin’s unprovoked war," he said on Thursday.

In addition to petrol price jumps, housing costs, which make up about a third of the government’s consumer price index, have risen sharply, a trend that is unlikely to reverse anytime soon.

The government’s report also showed that inflation rose 0.8 per cent from January to February, up from the 0.6 per cent increase from December to January.

For most Americans, inflation is running far ahead of the pay rises that many have received in the past year, making it harder for them to afford necessities like food, gas and rent.

As a consequence, inflation has become the top political threat to President Joe Biden and congressional Democrats as the midterm elections draw closer.

Small businesspeople have said in surveys that it is their primary economic concern.

The US Federal Reserve is set to raise interest rates several times this year in an effort to curb inflation.

Fed Chairman Jerome Powell told Congress last week that he supported a quarter-rate increase in March and has not ruled out a larger move at some point.

The Fed is expected to introduce its first interest rate increase at a meeting next week.

The economic consequences of Russia’s war against Ukraine have upended a broad assumption among many economists and at the Fed that inflation would begin to ease this spring as prices rose so much in March and April of 2021 that comparisons to a year ago would show declines.

Mr Powell said the consequences to the US economy due to the war in Ukraine “remain highly uncertain".

The Fed chairman added that the central bank's need to remove pandemic policy support has not changed because of the war.

Even before Russia’s invasion, inflation was not only rising sharply but also broadening into additional sectors of the economy.

Many prices have jumped over the past year because heavy demand has run into short supplies of items such as cars, building materials and household goods.

But even for some services unaffected by the pandemic, like rents, costs are also surging at their fastest pace in decades.

Steady job growth and high home prices are encouraging more people to move into apartments, elevating rental costs by the most in two decades.

Agencies contributed to this report