US Inflation Hits Highest Level in Almost Half a Century

Inflation soared to its highest level in 40 years last month, according to the latest figures for the Consumer Price Index (CPI). The CPI, an average measure of a basket of consumer goods and services, leapt 7.9% in February compared with the same time last year, according to the latest report issued by the US government.

It’s the highest level since 1982, but still below the dizzying heights reached by inflation in the early 1980’s when inflation reached 13.5% annually, according to statistics from the US Bureau of Labor.  

The rapid rise in energy prices is seen as a major contributor to increasing inflation. Oil prices have recently hit 14-year highs following the Russian invasion of Ukraine and the resulting US sanctions against Russian fuel. Russia is one of the world’s largest global exporters of oil and gas and supplies close to half of the EU’s gas.

High inflation is bound to put pressure on manufacturers as the cost of energy and raw materials such as aluminium, steel, nickel, and palladium soar.  

Nickel prices more than doubled earlier this week to top $100,000 per ton, according to Fortune Magazine, and forced the London Stock Exchange to step in and halt trading. Nickel is an important commodity in the manufacture of Electric Vehicles.  

Reuters news agency reported this morning that Rio Tinto became the first major mining company to cut ties with Russia, a move that will likely put further pressure on the price of raw materials. The company has previously said that it had no operational assets or employees in either Ukraine or Russia, but it does have commercial agreements with various Russian entities that it is in the process of severing, according to the news agency.

Citi analyst Ephrem Ravi says that he believes the Russian invasion will herald lasting changes in commodity markets. Cited in an article in Canada’s Globe and Mail, Ravi says that the twin storms of sanctions against Russia coupled with the global energy transition marks the start of a new level of price volatility in the resource markets.

All this means that there’s no respite in store for manufacturers already dealing with fragile supply chains, key component shortages and labor constraints.