The Top Six Inflation Drivers of 2022

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The Top Six Inflation Drivers of 2022

In June 2022, the 12-month rise in the Consumer Price Index (CPI) peaked at 9.1%, the fastest pace in 40 years, before dropping to 7.7% in October. This bout of inflation has been driven in large part by steep price hikes for essentials, hitting many U.S. households where it hurts the most. In fact, more than three-fourths of the annual increase in the CPI can be attributed to these six categories.

Source: U.S. Bureau of Labor Statistics, 2022

Consumer Blues?

Each month, researchers at the University of Michigan interview hundreds of consumers about their opinions on current economic conditions, as well as their personal finances, buying intentions, and expectations for the future. Survey results are captured in the Index of Consumer Sentiment, which is a closely watched economic indicator because household spending accounts for about two-thirds of U.S. gross domestic product.

Despite a strong labor market, the index fell to an all-time low in June 2022, before starting to improve in the third quarter. High inflation, the specter of rising interest rates, and stock market declines are some of the reasons consumers have felt pessimistic about their economic prospects.

Index of Consumer Sentiment chart showing consumer sentiment peaks and valleys from 1980 through June 2022 when it reached a record low of 50.0.

Source: University of Michigan, 2022 (data from January 1978 through September 2022)

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