December 5, 2021
Inflation in the United States reached its highest level since 1991

Inflation in the United States reached its highest level since 1991

  • Purchases of goods and services increased by 0.8% compared to August

  • According to the Federal Reserve, the annual increase is the largest since 1991

  • Real personal spending rose 0.4% in August

U.S. personal spending growth accelerated faster than forecast in August, driven by purchases of commodities, while a closer look at inflation exceeded estimates.

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Purchases of goods and services increased by 0.8% over the previous month, after a 0.1% decline in July. The company had previously reported a 0.3% return on spending in July.

The personal consumption expenditure price used by the Federal Reserve for its inflation target increased by 0.4% over the previous month and 4.3% over the previous year. The annual increase is the largest since 1991.

Consumer demand is strong in August, despite an increase in Govt-19 infections. The increase in spending, particularly driven by an increase in spending on food and household goods, reflects a shift from activities such as eating and traveling due to increased health concerns.

Distribution chain disruptions cause inflation

Adjusted for inflation, spending in August accelerated after falling the previous month. Real personal spending rose 0.4% in August, after a revised 0.5% drop in the previous month.

Inflation-adjusted spending on services rose 0.3% month-on-month, indicating a fall from a 0.7% gain in July. The report shows that the cost of goods rose 0.6% after the 2.6% fall.

Logistics companies have struggled to sustain a rapid recovery in demand since the beginning of this year. These restrictions pushed up prices and reduced the purchasing power of Americans.

The center of PCE, excluding food and energy, rose 0.3% in the second month. The move was 3.6% higher than the previous year, the highest level since 1991.

Federal Reserve Chairman Jerome Powell said this week that supply chain disruptions, which have pushed up inflation rates around the world, will be temporary.