Ticker: Inflation at 40-year high; Deficit hits two-year low

Inflation jumped at its fastest pace in nearly 40 years last month, a 7% spike from a year earlier that is increasing household expenses, eating into wage gains and heaping pressure on President Joe Biden and the Federal Reserve to address what has become the biggest threat to the U.S. economy.

Prices rose sharply in 2021 for cars, gas, food and furniture as part of a rapid recovery from the pandemic recession. Vast infusions of government aid and ultra-low interest rates helped spur demand for goods, while vaccinations gave people confidence to dine out and travel.

The Labor Department reported Wednesday  that a measure of inflation that excludes volatile food and gas prices jumped 5.5% in December, also the highest in decades. Overall inflation rose 0.5% from November, down from 0.8% the previous month.

“U.S. inflation pressures show no sign of easing,” said James Knightley, chief international economist at the financial services company ING. “We could be close to the peak, but the risk is that inflation stays higher for longer.”

Deficit hits two-year low

The federal government last month posted its smallest monthly budget deficit in two years thanks to a rebounding economy that helped boost tax receipts, coupled with slower spending as some COVID relief programs ended.

The Treasury reported Wednesday that the December deficit of $21.3 billion was the smallest monthly deficit since a $13 billion shortfall in December 2019.

For the first three months of this budget year, which began on Oct. 1, the government has recorded a deficit of $377.7 billion. That’s 30.1% below the shortfall run up during the same period a year ago when the government was still spending trillions of dollars to keep the economy from falling into an even deeper funk.

from Boston Herald https://ift.tt/3HXLqT4