Nearly 8% Inflation Highest In 40 Years: What It Means In VA, DC

VIRGINIA/DC — Surging prices for food, gas and housing that are already putting the squeeze on Virginia and D.C. residents could go even higher, according to a report Thursday from the Labor Department that showed inflation jumped 7.9 percent over the 12-month period ending in February, the sharpest spike since 1982.

In February, though, prices did not rise at the same rate in D.C. and Northern Virginia as they did in other metropolitan areas in the Mid-Atlantic region.

D.C. area residents paid 5.3 percent more for food in February compared with a year ago. Baltimore area residents paid 10.5 percent more year over year, while those in Philadelphia paid 10.1 percent more, according to the Labor Department's Bureau of Labor Statistics.

Increases in electricity and natural gas costs in homes were lower in D.C. and Northern Virginia than they were in surrounding areas as well, rising 12.2 percent in February from a year ago, compared with an 18.8 percent increase in Baltimore and a 14.6 increase in the Philadelphia area.

The government report doesn’t reflect increases in already-high gas prices associated with President Joe Biden’s announcement Tuesday of a ban on Russian crude and other energy imports as punishment for its unprovoked invasion of Ukraine.

The average gasoline price nationally stood at $4.32 a gallon Thursday, a jump of 6 cents over the day prior, according to AAA. The per-gallon cost of gas has increased 62 cents since Russia invaded Ukraine on Feb. 24, sparking fears worldwide of increasing energy costs.

Gasoline prices reached an all-time high in Virginia on Wednesday as the Russian invasion of Ukraine disrupts oil markets around the world. A gallon of regular unleaded reached an average of about $4.18, according to AAA Mid-Atlantic. The previous record was $4.01 set on July 17, 2008.

Adjusted for inflation, though, the real cost of a gallon of gas from July 2008 shoots up over $5 in today's dollars—well above the current cost per gallon.

Unlike food and at-home energy costs, the increase in gasoline prices in the D.C. area was higher than in nearby metropolitan areas. In February, gasoline prices increased by 38.9 percent compared to a year ago, while in Baltimore, gasoline prices rose by 37.9 percent versus a year ago. In Philadelphia, gasoline prices increased by 31.6 percent in February compared to February 2021.

On Wednesday, Virginia House Democratic Leader Eileen Filler-Corn called on Gov. Glenn Youngkin to issue an executive order declaring a state of emergency over the disruption in oil markets.

This emergency declaration would activate the Virginia Post-Disaster Anti-Price Gouging Act and provide the state with tools to protect residents from “unconscionable” prices at the pump, Filler-Corn said in a statement.

Former Governor Ralph Northam took similar steps after hackers engaged in a cyberattack on the Colonial Pipeline last year. Former Attorney General Mark Herring’s office collected fines after finding several gas stations generated excess profits.

The report is a cautionary tale about future increases, showing a steady increase in inflation since late fall. Inflation rose 0.8 percent from January to February, up from 0.6 percent from December to January and 0.6 percent from November to December.

The price of food increased on pace with inflation, costing Americans 7.9 percent more last month than in February 2021. Importantly, costs increased 1 percent from January to February 2022; 0.9 percent from December to January; and 0.5 percent from November to December.

The almost 8 percent inflation rate was driven not only by increases in almost everything Americans spend money on but also by 4.5 percent pay raises, which are higher than at any point in 20 years, and persistent shortages of goods and services, The Associated Press reported.

But even with those solid pay raises, many Americans aren’t able to keep pace with the increasing costs of necessities, which could put Democrats — who control both houses of Congress and the White House — in a vulnerable position in midterm elections.

Inflation could reach 9 percent this month or next, Eric Winograd, a senior economist at asset manager AllianceBernstein, told the AP.

Some of that will likely be driven by Russia’s war in Ukraine. Since Feb. 24, prices have soared for commodities for which the two countries lead the world in exporting, including wheat, corn, cooking oils and metals such as aluminum and nickel.

The cost of rent has also surged at the fastest rate in decades, largely due to steady job growth and surging real estate prices that have combined to put apartment vacancy rates at their lowest level since 1984, according to The AP analysis.

To beat back inflation, the Federal Reserve plans to raise interest rates several times in 2022, beginning with a quarter-point hike next week. It’s a delicate challenge for the Fed, which risks undercutting the economy and possibly triggering a recession if it tightens credit too aggressively, The AP reported.

Energy cost increases are a particularly difficult challenge for the Fed

Soaring energy costs pose a particularly difficult challenge for the Fed. Higher gas prices tend to both accelerate inflation and weaken economic growth. That’s because the more Americans spend at the gas pump, the less they’ll spend on other goods and services, creating a dynamic economists call “stagflation” — a combination of high inflation and a sputtering economy.

However, The AP reported that most economists think the U.S. economy is growing strongly enough that another recession is unlikely, even with higher inflation.

See Also: VA Gas Prices Hit Record High

The Associated Press contributed reporting.