EDITORS/NEWS DIRECTORS:

From voters in this year’s midterm elections to White House officials to Federal Reserve policymakers, chronically high inflation is becoming a growing source of concern and anxiety.

In the United States, consumer prices have climbed 8.2% over the past year. Although that was down slightly from the previous month’s figure, it was still close to the highest rate in four decades.

High inflation has spread to almost every corner of the economy. Some…

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EDITORS/NEWS DIRECTORS:

From voters in this year’s midterm elections to White House officials to Federal Reserve policymakers, chronically high inflation is becoming a growing source of concern and anxiety.

In the USA, consumer prices have climbed 8.2% over the past year. Although that was down slightly from the previous month’s figure, it was still close to the highest rate in four decades.

High inflation has spread to almost every corner of the economy. Some of the initial drivers of high prices – supply chain issues, shortages of semiconductors, the higher price of corn, oil and other commodities – have started to fade. The prices of certain goods, such as used cars, have even started to fall.

But inflation in the country’s vast service sectorwhich includes such disparate items as apartment rents, medical care, airfare, auto repairs, and hotel rates, actually accelerates and complicates the Fed’s ability to control inflation without causing a recession.

A key question: how long will Americans be able or willing to pay ever higher prices? The average wage is rising at a steady pace, but not as fast as prices, which means that consumers’ purchasing power is eroding. If this dynamic persists, companies may not be able to pass on the rising cost of wages and raw materials to their customers. The result would likely be lower inflation.

Yet as the Fed raises rates in an attempt to slow borrowing and spending, cool the economy and reduce inflation, the risk that it will tip the economy into a recession also increases.

Here are some tips for locating your inflation hedge:

REPORTING QUESTIONS

— Higher prices for basic necessities such as food, gas and rent are hitting low-income workers and families the hardest. How are rising grocery prices affecting demand at local food banks? Are more people falling behind on rent, leading to higher eviction rates?

— Rising apartment rents are currently one of the main drivers of inflation. How has rent changed in your area? Are there enough rental apartments available? Nationally, there is a shortage of apartments and single-family homes.

— Many large companies were able to raise prices more than necessary to cover their higher labor and input costs. Have businesses in your region been able to do this? Are customers starting to avoid their expensive products as a result?

— Are local businesses still struggling to find workers to fill vacancies? If so, do they offer a higher salary? Many businesses will pass on their higher labor costs to their customers in the form of higher prices, contributing to high inflation.

— As the Fed continues to raise borrowing rates and the economy begins to weaken, businesses will likely need fewer workers. Are businesses in your area cutting back on hiring? Or even fire workers? If so, it could be a harbinger of an impending recession.

PUBLISHABLE CONTEXT

Services inflation is typically driven by consumer demand and wage increases, which the Fed has struggled to reverse through its primary inflation-fighting tool: interest rate hikes. Nevertheless, the central bank may feel compelled to raise its short-term policy rate even higher than he expects now in an attempt to alleviate the crushing burden of inflation.

Inflation is eroding the wage and salary gains that have been paid to many American workers over the past year. This created a political threat to the Biden administration and congressional Democrats and intensified pressure on the Fed. The central bank has raised its key rate this year at the fastest pace in four decades.

Evan, as gas prices fell from a high of $5 a gallon in June, the cost of many services – apartment rents, medical care, restaurant meals, etc. – continues to increase rapidly. Inflation, excluding the volatile food and energy categories, actually accelerated in September, up 6.6% from a year earlier.

According to Fed Vice Chairman Lael Brainard, low-income families spend three-quarters of their income on basic necessities, more than double the proportion of high-income families.

RESOURCES

Here are some places to find numbers to help you with your reports:

— The standard measure of inflation is the Consumer Price Index, published by the Department of Labor’s Bureau of Labor Statistics: https://www.bls.gov/cpi/

— The BLS provides price data for hundreds of goods and services in a searchable database: https://www.bls.gov/cpi/data.htm

— Regional CPI data for the four major US census regions, nine census divisions, and 23 major metropolitan areas is available here: https://www.bls.gov/cpi/regional-resources.htm.

– The Federal Reserve tracks a separate inflation gauge that places less weight on housing costs and measures health insurance costs differently. Therefore, its preferred measure is often lower than the CPI. It is known as the “Personal Consumption Expenditure Price Index” and is reported by the Department of Commerce’s Bureau of Economic Analysis: https://www.bea.gov/data/personal-consumption-expenditures-price-index.

– There is not much regional specific data for PCE inflation. But the Commerce Department provides a measure of the cost of different states and some metropolitan areas, which can give local context to the inflation data: https://www.bea.gov/data/prices-inflation/regional-price-parities-state-and-metro-area.

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Localize It is an occasional feature produced by The Associated Press for use by its customers. Questions can be directed to Katie Oyan at [email protected]

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