Inflation soared 7.9% in past year, a fresh 40-year high

CHARLOTTE — At home, Russia’s attack on Ukraine is driving up the cost of filling gas tanks.

Gas prices held steady Friday in south Charlotte at about $4.19 per gallon for regular unleaded over a 24-hour period. But overnight, the rest of Charlotte and the state matched that number, inching another penny overnight.

Prices are also up one cent in South Carolina, bringing the state average to $4.08 a gallon.

The record-setting gas prices come as the latest inflation report shows the cost of just about everything is still going up.

Propelled by surging costs for gas, food and housing, consumer inflation jumped 7.9% over the past year, the sharpest spike since 1982 and likely only a harbinger of even higher prices to come.

The increase reported Thursday by the Labor Department reflected the 12 months ending in February and didn’t include the oil and gas price surges that followed Russia’s invasion of Ukraine on Feb. 24. Since then, average gas prices nationally have jumped about 62 cents a gallon to $4.32, according to AAA.

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Even before the war further accelerated price increases, robust consumer spending, solid pay raises and persistent supply shortages had sent U.S. inflation to its highest level in four decades. What’s more, housing costs, which make up about a third of the government’s consumer price index, have risen sharply, a trend that’s unlikely to reverse anytime soon.

“The numbers are eye-watering, and there is more to come,” said Eric Winograd, senior economist at asset management firm AllianceBernstein. “The peak in inflation will be much higher than previously thought and will arrive later than previously expected.”

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The government’s report Thursday showed that from January to February, inflation rose 0.8%, up from a 0.6% increase from December to January. Excluding the volatile food and energy categories, so-called core prices rose a sharp 0.5% month to month and 6.4% from a year earlier. Economists tend to monitor core prices because they more closely reflect longer-running inflation trends.

For most Americans, inflation is running far ahead of the pay raises that many have received in the past year, making it harder for them to afford necessities like food, gas and rent. As a consequence, inflation has become the top political threat to President Joe Biden and congressional Democrats as the midterm elections draw closer. Small business people say in surveys that it’s their primary economic concern, too.

Retail experts say it’s costing companies more to produce all sorts of items, and in turn, many items are shrinking in size or quantity, although you’re still paying the same -- or even more. It’s called “shrinkflation.”

“The American consumer is really going to be tested. They’re going to need to dip into savings,” Ed Moya, Senior Market Analyst with Oanda said. “You’re looking at quite a few more months, very hot inflation.”

Some of the most popular items at risk of shrinkflation include toilet paper, snacks and beauty products like shampoo and conditioner.

Seeking to stem the inflation surge, the Federal Reserve is set to raise interest rates several times this year, beginning with a quarter-point hike next week. The Fed faces a delicate challenge, though: If it tightens credit too aggressively this year, it risks undercutting the economy and possibly triggering a recession.

Slower growth poses a particularly difficult challenge for the Fed, because it comes at a time that higher gas prices are also lifting inflation. That pattern is akin to the “stagflation” dynamic that made the economy of the 1970s miserable for many Americans.

Most economists, though, say they think the U.S. economy is growing strongly enough that another recession is unlikely.

The Associated Press contributed to this report.

(WATCH BELOW: Families feel sting of inflation as prices for gas and groceries increase in Charlotte area)