U.S. inflation surged by 7% in 2021 and rose at the fastest pace in 40 years. Americans might get some relief from rising prices this year, but they are still going to pay a lot more than they did before the pandemic.
The consumer price index report for January, due Thursday morning, is likely to show another sharp increase in inflation in the first month of 2022. The yearly rate could even climb to 7.2% or so.
The Federal Reserve plans to raise interest rates soon and try to bring inflation below 3% by year. It won’t be easy, economists say.
“The factors that have driven inflation higher in 2021 are only expected to dissipate gradually and are likely to keep pushing inflation higher through the first half of 2022,” said chief U.S. economist Kevin Cummins of Natwest Markets.
Here are some of the goods and services that showed some of the biggest price increases last year and the prospects for a decline in 2022.
Price increase in 2021: 6.5%
Last time prices rose that much: 2008
The cost of food is likely to keep going up this year. Food manufacturers are paying more for packaging, transportation and other inputs. Labor is also hard to find and workers are demanding higher wages.
The cost of meat is particularly high. Meat prices soared 15% in 2021 and the CEO of Tyson Foods this week said demand is still outstripping supply.
“We’re seeing inflation across our supply chain,” Chief Executive Officer Donnie King told reporters in a conference call.
Price increase in 2021: 49.6%
Last time prices rose that much: 2009
Gas prices have soared in the past year and a barrel of oil topped $90 for the first time since 2014. A year ago, a barrel cost just a bit over $50.
The average cost of a gallon of gas shot up to $3.38 at the end of 2021 from $2.33 at the start of the year.
Prices are unlikely to rise as much in 2022, but they probably won’t decline, either.
Some analysts think the cost of a barrel of oil could move to as high as $120. Producers scaled back early in the pandemic and aren’t rushing to pump more petroleum.
New cars and trucks
Price increase in 2021: 11.8%
Last time prices rose that much: Record increase
Auto companies could have sold a record number of new cars last year — if there wasn’t a big computer-chip shortage that froze production.
The shortage of new vehicles spurred an even bigger increase in the cost of used cars and trucks. They rose a record 37% last year.
Renting a car wasn’t much easier on the wallet. Rental prices jumped 36% in 2021.
The chip shortage is likely to ease this year, but not enough to drive prices lower. The sale of new and used auto and vehicle rentals are expected to set new records.
Price increase in 2021: 4.2%
Last time prices rose that much: 2006
People who rent housing saw the biggest increase in 2021 in 15 years. A lack of new and used homes for sale has driven up prices. So too has an economic recovery.
Rents spiked in the second half of 2021 and there’s little sign that prices are about to relent. The high cost has forced some renters to try to buy houses even though home prices are also high and mortgage rates are rising.
The cost of most consumer goods rose rapidly in 2021. The largest increases included:
- Furniture: 13.8%
- Tobacco: 9%
- Major appliances: 8%
- Clothing: 5.8%
- Televisions: 4%
Are prices likely to keep rising that fast? Probably not. Yet the ongoing chip shortage and reliance on China to produce many of these goods means consumers can’t expect a big break.
Most appliances and televisions, for instance, require computer chips. The cost of TVs rose in 2021 for the first time ins 41 years.
Furniture prices are hostage to sky-high lumber prices, meanwhile, and most clothes worn by Americans are produced overseas. The apparel has to be shipped to the U.S. where ports are congested and shipping is hard to obtain and expensive.
Cotton prices also soared last year and analysts predict they will rise again in 2022.