January 14, 2021: According to a closely watched gauge the Labor Department released Wednesday, inflation plowed ahead at its fastest 12-month pace in nearly 40 years during December.

The consumer price index, a metric that measures costs across dozens of items, increased 7%, according to the department’s Bureau of Labor Statistics. Every month, CPI rose 0.5%.

Economists surveyed by Dow Jones expected the gauge to increase 7% on an annual basis and 0.4% from November.

The annual move was the fastest increase since June 1982 and came amid a shortage of goods and workers and on the heels of unprecedented cash flowing through the U.S. economy from Congress and the Federal Reserve.

Stocks rose after the news despite the substantial gain, while government bond yields were primarily negative.

“The December CPI report of a 7% increase from the 12 months will be shocking for some investors as we haven’t seen a number that high” in almost 40 years, said Brian Price, head of investment management at Commonwealth Financial Network. “However, this print was largely anticipated by many, and we can see that reaction in the bond market as longer-term interest rates are declining so far this morning.”

Core inflation was the most significant annual growth since February 1991. Excluding food and energy prices, the so-called core CPI increased 5.5% year over year and 0.6% from the previous month. That compared with estimates of 5.4% and 0.5%.

Shelter costs, which make up nearly one-third of the total, rose 0.4% for the month and 4.1% for the year. That was the fastest pace since February 2007.

Used vehicle prices, which have been a significant component of the inflation increase during the Covid pandemic due to supply chain constraints that have limited new vehicle production, rose another 3.5% in December, bringing the growth from a year ago to 37.3%.

Conversely, energy prices mostly declined for the month, decreasing 0.4% as fuel oil was down 2.4% and gasoline fell 0.5%. Still, the complex as a whole rose 29.3% in the 12 months, including a gain of 49.6% for gas.

Inflation has been eating into otherwise substantial wage gains for workers. However, actual average hourly earnings posted a slight 0.1% increase for the month, as the 0.6% total gain outweighed the 0.5% CPI headline increase. According to BLS calculations, actual earnings declined 2.4% on a year-over-year basis.