A measure of prices that is closely tracked by the Federal Reserve rose 5.8% last year, the sharpest increase since 1982, as brisk consumer spending collided with snarled supply chains to raise the costs of food, furniture, appliances and other goods.
The report Friday from the Commerce Department also said that consumer spending fell 0.6% in December. A wave of omicron cases discouraged many Americans from traveling, eating out, or visiting theaters and other entertainment venues. At the same time, incomes rose 0.3% last month, providing fuel for future spending.
According to the Associated Press, economists predict that growth will slow in the first three months of the year as consumer spending is expected to stagnate and remain weak.
Joshua Shapiro, a chief U.S. economist at MFR Inc. said, “You’re going to see the labor market continue to heal, and, the pandemic permitting, the consumer will have enough firepower to grow spending at a reasonable rate as the year goes on.”
As CNBC noted from the report, employment costs, or total compensation costs, for civilian workers increased by 4% over the last 12 month period, which is the fastest pace for that metric since it started being recorded in 2002.
The Federal Reserve has been aggressively trying to tighten policy as inflation rises, yet most analysts say they expect inflation to slow down this year. As rents and wages increase though, it could likely still remain high.