Inflation hits another 40-year high as recession fears loom

Inflation soared by 8.5% over the past 12 months, the federal government reported Tuesday amid fears of a looming recession.

The Labor Department said the rise in the Consumer Price Index through March is the largest since 1981. Officials noted that inflation had climbed to a 40-year high for the fifth straight month. Economists say there are few signs the rise in prices will end soon.

“Inflation is killing everything,” said Don Schnorr, a 59-year-old construction worker from Milwaukee. “Gas prices are going up, grocery prices are going up, and it doesn’t look like it’s getting any better.”

Americans are increasingly shelling out more of their paychecks on gasoline, food and housing while the U.S. economy continues to face shortages because of the supply chain crisis.

More voters say Mr. Biden is partially responsible. A CBS/YouGov has found that 69% of U.S. adults disapprove of the way the administration is handling inflation. 

“I think things roll down from the top, so I would say the new presidential administration has something to do with it,” Mr. Schnorr said. 

Gasoline prices have jumped 48% over the past year. Meanwhile, food prices increased by 8% and housing costs rose 5%.

Similarly, electricity and home heating prices jumped more than 13%. Electricity prices rose 11.5%, and the price of natural gas increased 21.6%. Natural gas powers almost 40% of electricity generation in the U.S., according to the Energy Information Administration, the Department of Energy’s data and analysis arm.

The new data paint an even worse picture when broken down by month. Gasoline prices rose 18.3% from February to March.  

White House officials are trying to downplay the significance of the inflation report. They said Monday that Russian President Vladimir Putin’s war against Ukraine had upended the global economy and drove up energy prices. 

“Because of the actions we’ve taken to address the Putin price hike, we are in a better place than we were last month,” said White House press secretary Jen Psaki. “But we expect March [inflation numbers] to be extraordinarily elevated due to Putin’s price hike.” 

The defense by administration officials, though, ignores price increases throughout every sector of the economy.

---

SEE ALSO: Manchin accuses Biden of failing to ‘act fast enough’ to combat inflation

---

Excluding often-volatile food and energy costs, inflation soared 6.5% from March 2021 to March 2022. The jump was the biggest 12-month increase since President Reagan’s first term more than 40 years ago.

Inflation is also eating away at the paychecks of American workers and families. The Labor Department estimates that the average weekly earnings of U.S. workers dropped 1.1% from February to March. Overall, the figure is much higher when extrapolated for the past year. 

“Under President Biden’s administration, the American people have become demonstrably poorer,” said E.J. Antoni, an economic analyst at the conservative Heritage Foundation. “Prices have surged so rapidly that real earnings — earnings adjusted for price changes — have dropped 4.5% on Biden’s watch.” 

Americans are increasingly responding to the rise in prices by using credit cards to meet everyday expenses, according to a report issued by the Federal Reserve last week. 

“You’ve got a nearly 8% inflation rate, which is rising faster than people’s incomes,” said Stephen Moore, an economic adviser to President Trump. “People are actually losing purchasing power because inflation is like a tax on earnings.”
 
The Federal Reserve has announced plans to try to lower inflation by aggressively raising interest rates over the coming months. Economists worry that the move could trigger a recession.

Bank of America warned its clients Monday that the economy, wracked by supply chain issues and an overly generous COVID-19 relief package, appears primed to enter a tailspin as interest rates jump. 

Michael Hartnett, Bank of America’s chief investment strategist, predicted a “recession shock” by the end of 2023 or soon thereafter. 

Republican lawmakers say Mr. Biden’s policies are to blame for rising inflation. They note that the White House’s $1.9 trillion coronavirus relief package, signed into law in 2021, flooded the economy with excess money when the nation was facing a supply chain crisis.

“If the Biden administration truly wants to find the cause of record-high inflation, all they have to do is look in the mirror,” said Sen. Lindsey Graham of South Carolina, the top Republican on the Senate Budget Committee. “These dramatic, record-setting increases in inflation weren’t caused by Vladimir Putin, but by the bad choices of President Biden and the Democrats who control Congress.”

The inflation numbers pose another major headache for Mr. Biden and congressional Democrats. Mr. Biden’s party is expected to face a tough political environment in this year’s midterm elections, but inflation has sapped morale among Democrats.

Mr. Biden, whose approval rating has hit a low of 42%, has been trying to convince consumers in recent weeks that he has a plan to fight inflation. During a swing through Iowa on Tuesday, the president touted his push to lower gasoline prices by temporarily removing restrictions on sales of higher-ethanol gasoline blends.

“With this waiver … you’re not going to show up at your local gas station and see a bag over the pump that has the cheapest gas,” Mr. Biden said at a speech in Menlo, Iowa. “You’re going to be able to keep filling up with [ethanol], and it’s going to solve a whole problem.”

The administration says the move would lower pump prices by about 10 cents a gallon.

Voters remain skeptical, mainly because they have yet to see any reduction in prices.

Nekita Martins, a 34-year-old New Jersey real estate agent, said eating at restaurants ends in sticker shock, as does shopping at the grocery store.

“I think overall it’s the importing, it’s just the delays. That’s my take on it,” she said.

Ms. Martins said Mr. Biden should focus on making and transporting more products within the U.S. The president insists he is focused on that.

“So was the last guy and the last guy before that,” said Nelson Mota, the 37-year-old partner of Ms. Martins. “You think a gallon of milk is going to go back down? No. They can get away with it now. Why would they ever do that?”

• Jeff Mordock contributed to this report.