The cost of imported goods jumped two percent as American buying power dimmed further amid the biggest jump in inflation in 40 years, Department of Labor data showed Wednesday.
This was the biggest jump in import prices in 11 years and follows last week’s report showing that the Consumer Price Index rose 0.6 percent in January and 7.5 percent compared with a year earlier.
While higher fuel prices helped push up the headline figures, even absent fuel prices rose 1.4 percent. That’s the most ever recorded in data going back to 2001.
Economists had been expecting a 1.2 percent rise in import prices in January. Compared with a year ago, prices are up 10.8 percent.
Foreign purchases are also competing more for U.S. goods. Prices of exports rose 2.9 percent in the month. Prices are up 15.1 percent compared with a year ago, indicating that inflationary pressure has continued to climb as economies re-open around the world.
The global spread of inflation is largely rooted in the same causes as U.S. inflation. Governments and central banks loosed immense amounts of fiscal and monetary accommodation in an effort to combat pandemic slumps. That kept recessions short but also pulled forward growth and consumption faster than supply could expand, driving prices higher. An earlier end to the loose spending and monetary policies could have kept inflation under control but was politically intolerable to Democrats in the White House and Capitol Hill and their counterparts abroad. Now central banks around the globe are attempting to reverse course by raising interest rates in hopes of resetting economies at a slower pace with less inflation without tipping them into recessions.
China’s zero-tolerance policies toward the pandemic, which have shuttered ports and factories and put its exports into a stop-start pattern, are also likely driving up import prices.
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