Inflation rises sharply in October, prompting more fears of a price-growth crisis

• PCE inflation — for personal consumption — rose 0.6% in October, a big jump but short of economists' forecasts.
• It shows inflation holding at elevated levels as supply bottlenecks and soaring energy costs plagued the economy.

Prices in the US kept surging in October, dashing hopes for weaker inflation and raising new worries around the strength of the recovery.

The Personal Consumption Expenditures price index — a commonly used measure of US inflation — rose 0.6% in October, the Commerce Department said Wednesday. That came in below the median estimate of a 0.7% jump from economists surveyed by Bloomberg. It also marks the fastest inflation rate since June 2008 and a significant acceleration from the 0.3% growth seen in September.

The index climbed 5% on a year-over-year basis. That compares to the forecast for a 5.1% jump and reflects the strongest one-year inflation since late 1990.

Core PCE, which strips out volatile energy and food prices, rose 0.4% in October. That matched the average forecast. The Federal Reserve uses core PCE as its inflation measure of choice, and the Wednesday print all but confirms to the central bank that inflation isn't cooling off as anticipated.

The Fed and the Biden administration had expected price growth to weaken as the economy normalized. Yet hurdles in the recovery have kept prices soaring at a historic pace. Reopening fueled a spending surge as Americans deployed pent-up savings. The wave of demand quickly overwhelmed inventories across the US, and producers were left with massive backlogs and still-damaged supply chains. With little supply available to service shoppers' voracious spending, businesses hiked prices.

The mismatch and resulting inflation have weighed heavily on Americans' recovery hopes. Consumer sentiment sank to decade lows in November, according to the University of Michigan Surveys of Consumers. Respondents cited elevated inflation and a lack of helpful policy for their soured outlooks. One in four Americans said inflation had eroded their living standards.

The latest PCE report confirms the sharp pickup for inflation first seen earlier this month. The Consumer Price Index posted a 0.9% gain in October, according to data published November 10. That beat the median forecast for a 0.6% jump and, like PCE, marked the largest one-month gain since 2008.

The CPI data showed soaring energy prices driving the bulk of the pickup. That was partially powered by a 6.1% jump in gasoline prices through October.

Higher prices at the pump have led the Biden administration to take new action against higher inflation. President Joe Biden called on the Federal Trade Commission on November 17 to investigate potential "illegal conduct" at oil and gas companies, alleging the industry was artificially keeping prices high to boost profits.

More recently, the president announced plans to tap the Strategic Petroleum Reserve to help balance gasoline supply with overwhelming demand. The White House said Tuesday it will release 50 million barrels from the underground stockpile to help cool prices.

To be sure, the release is only a temporary solution. The Organization of Petroleum Exporting Countries has denied Biden's calls for increased production, signaling oil supply will remain constrained in the weeks ahead. The 50 million barrels set to be released also only cover about a week of supply, as average US consumption in 2020 was roughly 8 million barrels per day. And crude oil prices increased following the administration's announcement.

Still, the Fed is optimistic inflation will still fade from its worrying highs. It's "very difficult to predict" when the supply crisis will abate, but inflation should move down "by the second or third quarter" of 2022, Fed Chair Jerome Powell said in a November 3 press conference.