U.S. consumers continue to feel the pain of rising prices, with the Consumer Price Index (CPI) rising another 0.8% in February, on top of a 0.6% jump in January. In the 12 months ending in February 2022, the CPI rose 7.9%, the largest increase since 1982, and more increases are expected as the U.S. sanctions on Russia continue to drive up the price of gasoline and other essential goods.
“The cost to consumers is high,” said Ryan Sweet, a senior economist at Moody’s Analytics in West Chester, Pennsylvania. “However, there are also reasons to be optimistic that consumers can weather a temporary spike in gasoline prices, as household balance sheets in aggregate are in great shape. Gasoline spending as a share of total nominal consumption is low.”
February CPI data does not fully reflect the spike in oil prices following the outbreak of the war in Ukraine, with US gasoline prices averaging a record $4.318 per gallon compared with $3.469 a month ago, AAA data showed.
The Federal Reserve is expected to announce a rate hike next week in response to rising inflation, and economists are expecting as many as seven additional rate hikes through the end of 2022 as the Fed acts to keep inflationary forces in check. Soaring inflation is also wiping out wage gains, costing the average household $296.45 per month, up from $276 in January. President Joe Biden issued a statement that said in part, “As I have said from the start, there will be costs at home as we impose crippling sanctions in response to Putin’s unprovoked war, but Americans can know this, the costs we are imposing on Putin and his cronies are far more devastating than the costs we are facing.”
Overview by Don Apgar, Director, Merchant Services Advisory Practice at Mercator Advisory Group
