U.S. consumer prices jump 6.2% in October, the biggest inflation surge in more than 30 years

Inflation across a broad swath of products that consumers buy every day was even worse than expected in October, hitting its highest point in more than 30 years, the Labor Department reported Wednesday.

The consumer price index, which is a basket of products ranging from gasoline and health care to groceries and rents, rose 6.2% from a year ago. That compared to the 5.9% Dow Jones estimate.

On a monthly basis, the CPI increased 0.9% against the 0.6% estimate.

Stripping out volatile food and energy prices, so-called core CPI was up 0.6% against the estimate of 0.4%. Annual core inflation ran at a 6.2% pace, compared to the 4% expectation and the highest since November 1990.

Fuel oil prices soared 12.3% for the month, part of a 59.1% increase over the past year. Energy prices overall rose 4.8% in October and are up 30% for the 12-month period.

Used vehicle prices again were a big contributor, rising 2.5% on the month and 26.4% for the year. New vehicle prices were up 1.4% and 9.8% respectively.

Food prices also showed a sizeable bounce, up 0.9% and 5.3% respectively. Within the food category, meat, poultry, fish and eggs collectively rose 1.7% for the month and 11.9% year over year.

The price increases meant that workers fell further behind.

In a separate report, the Labor Department said real wages after inflation fell 0.5% from September to October, the product of a 0.4% increase in average hourly earnings that was more than offset by the CPI surge.

Shelter costs, which make up one-third of the CPI computation, increased 0.5% for the month and are now up 3.5% on a year-over-year basis, pointing to more reasons for concern that inflation could be more persistent than policymakers anticipate. The annual pace is the highest since September 2019.

The data comes as policymakers such as Fed Chairman Jerome Powell and Treasury Secretary Janet Yellen maintain that the current price pressures are temporary and related to pandemic-specific issues. While they have conceded that inflation has been more persistent than they expected, they see conditions returning to normal over the next year or so.

Stock market futures fell following the report and bond yields rose.

Escalating inflation could cause the Fed to tighten policy more quickly than it has indicated. The central bank has indicated that it will within the next few weeks start reducing the amount of bonds it buys each month, though officials have indicated that interest rate hikes are still off in the future.

Traders on Wednesday morning were pricing in two rate hikes in 2022 and about a 44% probability of a third increase, according to the CME’s FedWatch tool. The Fed has indicated a narrow likelihood of just one hike ahead, though St. Louis Fed President James Bullard told CNBC overnight that he sees two.

Other market-based measures also have turned more hawkish, with the 5-year breakeven rate, which compares Treasury yields to inflation-indexed bonds, hitting a record high above 3%.

A separate report Wednesday showed that initial claims for jobless benefits edged lower to 267,000, a fresh pandemic-era low after declining from 4,000 the previous week. That was below the Dow Jones estimate for 269,000.

Continuing claims, which run a week behind, increased by 59,000 to 2.16 million, while the total receiving benefits under all programs fell by 107,095 to 2.56 million. The latter number was at 21.7 million a year ago.

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