Inflation nation: US consumer prices surge to forty year high | Business and Economy News

US consumer prices rose 7.5 percent last month – the sharpest annual rise since February 1982.

If you’ve noticed your dollars don’t seem to have the same purchasing punch as they did a year ago, there’s a very good reason for that.

Consumer price inflation in the United States rose at an annual rate of 7.5 percent in January, the Bureau of Labor Statics said on Thursday. That is the fastest pace since July 1982.

On a monthly basis, the Consumer Price Index (CPI) – which measures price changes in a basket of goods and services –  increased 0.6 percent in January compared to the previous month.

Surging prices for groceries, electricity, and rent led the charge higher, with the food index rising 0.9 percent in January, after increasing 0.5 percent in December.

The energy index also rose 0.9 percent in January compared to the previous month, as soaring electricity prices were partially offset by falling prices for gasoline and natural gas.

The so-called “core” index, which strips out volatile food and energy, rose 0.6 percent in January – the same rise as December.

January marked the seventh time in the past 10 months that the core index rose at least 0.5 percent.

Inflation is placing an increasingly onerous burden on American households but is especially tough on low-income ones because it eats up a larger share of their financial resources.

Economists over at Moody’s Analytics estimate that annual inflation is costing the average US household $250 a month based on December’s CPI figures.  Americans aged 35 to 54 are spending $303 – $305 more a month, according to Moody’s, while pensioners aged 65 and older, are spending $194 a month.

To place that burden and the financial fragility it feeds into perspective – some 36 percent of Americans do not have enough cash or cash its equivilent to cover a $400 emergency expense, such as a car repair or medical bill, according to the US Federal Reserve.

Inflation has become the main point of concern for the Federal Reserve, which is gearing up to raise interest rates to tame rising prices.