Consumer prices hit a 31-year high in October, a worse-than-expected report on inflation that put President Biden on the defensive and spelled more trouble for his unfinished massive social spending bill.
The Consumer Price Index, which monitors the costs of goods such as gasoline and groceries, rose 6.2% in October compared with October 2020, the Labor Department reported Wednesday. That was the largest increase since December 1990 and greater than the Dow Jones estimate of 5.9%.
The worsening inflation bolstered the arguments of economists such as Democrat and former Treasury Secretary Larry Summers, who has been saying for most of this year that more government spending and higher taxes would “further stimulate an already overheating economy.”
The price increases in the past 12 months are across the board:
• Unleaded gasoline, 51.3%.
• Fuel oil, 59.1%.
• Beef, 20.1%.
• Chicken, 8.8%.
• Eggs, 11.6%.
• Televisions, 10.4%.
• Children’s shoes, 7.5%.
• Baby food, 7.9%.
Prices for furniture and bedding had their biggest increase since 1951.
Stocks fell sharply on the report of record price increases. The Dow Jones Industrial Average fell 240 points, or 0.66%, to close at 36,079 points. The Nasdaq plummeted 1.66%.
The developments further imperiled Mr. Biden’s $1.75 trillion spending bill, which needs the support of all 50 Democratic senators to pass. Sen. Joe Manchin III, a West Virginia Democrat who has repeatedly expressed concern about the bill’s impact on inflation, raised that alarm again Wednesday.
“By all accounts, the threat posed by record inflation to the American people is not ‘transitory’ and is instead getting worse,” Mr. Manchin said in a statement. “From the grocery store to the gas pump, Americans know the inflation tax is real and D.C. can no longer ignore the economic pain Americans feel every day.”
Mr. Biden defended his spending plans and historic proposed tax increases as a way to reduce inflation. Traveling to Baltimore, he said more government spending on port infrastructure from a $1.2 trillion bill that he will sign Monday will ease the supply chain crisis, making more goods available and lowering consumer prices.
“This bill is going to reduce the cost of goods,” said Mr. Biden, standing in front of longshoremen and shipping containers on the waterfront. “We’re set to make significant progress.”
Still, administration officials said it will be months before they identify infrastructure projects for expansions and renovations.
The president blamed the COVID-19 pandemic for “stretching supply chains like never before.” Mr. Biden said he received assurances Tuesday from the CEOs of Walmart, Target, FedEx, UPS and others that store shelves “will be stocked” during the holiday season.
He said steps to ease shipping bottlenecks at California ports have helped. Still, he said, “Consumer prices remain too high. It’s worrisome, even though wages are going up.”
The port in Baltimore is adding cranes to unload cargo and a new berth for container ships. A tunnel is undergoing a $125 million expansion to allow shipping containers to be moved onto rail cars at a faster pace.
Some economists and Republican lawmakers dismissed Mr. Biden’s outlook.
“Today’s dismal Consumer Price Index figure, combined with the soaring Producer Price Index 8% number from earlier this week, is evidence that President Biden’s policies are making life worse, not better, for working-class Americans,” said Steve Moore, a conservative economist who advised President Trump. “And full-fledged Bidenonomics through his ‘Build Back Better’ plan will only make inflation even worse by spending, borrowing trillions more dollars we don’t have. Inflation is not ‘transitory,’ nor is it just ‘high-class problems.’ It hurts all Americans, especially the poor and middle class.”
With rising prices of various goods during the holiday shopping season, there is a growing sense that a high inflation rate is becoming the new normal. Consumers also are bracing for the costs of heating their homes this winter.
The network Alignable released a survey Wednesday of 3,430 small businesses nationwide that found inflation was the top concern for the second straight month.
The survey found that 90% of small businesses fear inflation will hurt their recovery and 48% are “highly concerned” about it.
Republicans are signaling that they intend to make inflation a key pillar of the 2022 midterm election campaigns. In Iowa, the state Republican Party targeted vulnerable Democratic Rep. Cynthia Axne on Wednesday over inflation and Mr. Biden’s social welfare bill.
“Democrats are finally beginning to understand what I have known all year: Inflation is crushing Iowans,” said state Republican Party Chairman Jeff Kaufmann. “While Iowans have seen soaring gas prices, empty shelves, and the paychecks stretching thinner, Cindy Axne has been solely focused on implementing the largest tax increase in decades. Axne has yet to admit that inflation is a problem and proves just how out of touch she is with Iowans.”
Mrs. Axne did not respond to a request for comment.
Rep. Kevin Brady of Texas, the top Republican on the House Ways and Means Committee, said inflation “is a pay cut families can’t afford.”
“No wonder Americans now rank inflation alongside COVID as their biggest concerns — and believe Biden’s $4 trillion tax-and-spending binge will only make prices worse,” he said.
Some economists say government spending isn’t the leading cause of the rising inflation rate. Josh Bivens, director of research at the left-leaning Economic Policy Institute, said higher prices are “not driven by macroeconomic overheating.”
“Instead, this spike is largely driven by COVID-related factors: a reallocation of spending away from face-to-face services and toward goods combined with supply-chain bottlenecks,” he said.
He added that he believes enacting the “Build Back Better” package “is the right move.”
Mr. Bivens did say some of the “demand boost” created by the administration’s $1.9 trillion American Rescue Plan this spring “spilled over into price and wage pressure.”
In a statement shortly after the consumer price report was released, the president said his $1.75 trillion proposal, which would expand the social safety net with programs such as universal pre-kindergarten and broader health coverage, would reverse rising prices and create jobs.
“It is important that Congress pass my Build Back Better plan, which is fully paid for and does not add to the debt, and will get more Americans working by reducing the cost of child care and elder care and help directly lower costs for American families by providing more affordable health coverage and prescription drugs — along with cutting taxes for 50 million Americans, including for most families with children,” Mr. Biden said.