US inflation builds with biggest gain in consumer prices since 1990

US consumer prices rose last month at the fastest annual pace since 1990, cementing high inflation as a hallmark of the pandemic recovery and eroding spending power even as wages surge.

The consumer price index increased 6.2 per cent from October 2020, according to Labor Department data released Wednesday. The CPI rose 0.9 per cent from September, the largest gain in four months.

Both advances exceeded all estimates in a Bloomberg survey of economists.

Higher prices for energy, shelter, food and vehicles fuelled the supercharged reading and indicated inflation is broadening out beyond categories associated with reopening.

Stocks opened lower, while the yield on the 10-year Treasury rose and the dollar strengthened.

Against a backdrop of solid demand, businesses have been steadily raising prices for consumer goods and services at the same time supply chain bottlenecks and a shortage of qualified workers drive up costs.

The pickup suggests higher inflation will be longer-lasting than previously thought, putting pressure on Federal Reserve officials to end near-zero interest rates sooner than expected and potentially to quicken the pace of the bond-buying taper announced last week.

Excluding the volatile food and energy components, so-called core inflation rose 0.6 per cent from the prior month and 4.2 per cent from a year earlier. The annual increase was the largest since 1991.

Shelter costs — which are considered to be a more structural component of the CPI and make up about a third of the overall index — rose 0.5 per cent in October, the most in four months as higher rents and home prices feed into the data. The cost of hotel stays increased. Prices for new cars rose 1.4% last month as a global shortage of semiconductors continues to limit inventories and drive up costs. Used-vehicle prices jumped 2.5 per cent.