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Consumer prices are rising at their fastest pace in decades — and that inflation has been most acute in household staple items like food, housing and transportation, making it hard to escape the budgetary sting.

The Consumer Price Index jumped 7.9% in February relative to a year earlier, the largest 12-month increase since January 1982, the U.S. Department of Labor said Thursday.

The index measures price fluctuations across a broad basket of goods and services. A $100 basket a year ago would cost $107.90 today.

Shelter, gasoline and food were the largest contributors to the increase in overall prices in February, the Labor Department said. (The price index jumped by 0.8% over the month.)

These three categories were the three largest components of household budgets in 2020, respectively. Together, they accounted for 63% of total expenses, according to most recent Labor Department data.

“There’s nowhere to hide,” said Greg McBride, chief financial analyst for Bankrate. “This is hitting everybody.”

Inflation “is most pronounced on items that are necessities,” he added.

(Gasoline is part of the broader “transportation” category, which also includes public transit costs and vehicle purchases. Car sales have also spiked over the last year.)

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Of course, inflation doesn’t impact all consumers equally. For example, a consumer who commutes by car and has to fill up a gas tank may feel higher prices more acutely than one who works from home or uses public transportation. And American workers have gotten big raises in the past year, reducing (though not always overriding) the sting of higher prices.

The Federal Reserve is also expected to start raising interest rates next week in an attempt to tame inflation.

The big three

Household grocery bills swelled by 8.6% in the last 12 months, the largest jump since April 1981, according to the Labor Department.

Costs for all major food groups increased in February; dairy and fruits and vegetables saw prices rise at their fastest monthly pace in over a decade.

Gasoline price are up 38% in the last year. That statistic doesn’t include the recent run-up due to Russia’s invasion of Ukraine, which pushed prices at the pump to more than $4 a gallon, on average, on Sunday — the highest since 2008.

Overall energy costs (which include items beyond gasoline) are up the most since July 1981, on an annual basis.

Shelter costs like rents are up 4.7% in the last year, the most since May 1991. While that percentage increase was smaller than in other categories, housing costs account for more than a third of the average household budget — giving it an outsized dollar impact.

“That comparatively benign increase … is likely to put the biggest squeeze on household budgets for the remainder of the year,” McBride said.

A 5% increase in a $1,000-a-month apartment lease amounts to much more money than a 20% rise in something that costs $5, for example ($50 a month versus $1, respectively). And a lease locks in that price over a fixed term.

Why inflation?

Elevated inflation began emerging in spring 2021 as the U.S. economy came out of its pandemic hibernation.

Consumers had pent-up demand after staying home for months to reduce the spread of Covid-19. Households were flush with cash; they’d been unable to spend on things like entertainment and travel, and had savings from stimulus checks and enhanced unemployment benefits the federal government issued to prop up the economy.

High consumer demand stressed supply lines already beleaguered by virus-related disruptions. Higher prices followed, though were initially concentrated in just a few categories. Many economists and federal officials thought the phenomenon would be temporary.

However, inflation has persisted. Consumers may see costs rise even faster in the next few months, according to financial experts.

That’s likely to be true of gasoline and other categories negatively affected by the war in Ukraine. Further, the supply-chain snarl “may be worsened by prolonged economic consequences” of the conflict, according to Jason Pride, chief investment officer of private wealth at Philadelphia-based Glenmede Trust Company.

He expects prices to rise at a more modest 4% to 5% annual rate by the end of 2022.

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