Inflation in the United States reached its highest level in 40 years, after prices of gasoline, food and other basic products rose in May. The Labor Department reported Friday that consumer prices rose 8.6% in May from the same month a year earlier, outpacing an 8.3% rise in April.
Prices rose 1% from April to May, compared to 0.3% from March to April. Most of the increase was due to gasoline.
The broad rise in prices has also been recorded in the so-called “core” inflation, a measure that excludes the volatility of food and energy prices. In May, core prices rose 0.6% for the second month in a row and 6% in a year.
Friday’s report highlighted concerns that inflation is outpacing the rise in energy prices caused by supply chain blockages and Russia’s invasion of Ukraine. And the mounting pressure on the Federal Reserve to keep raising interest rates – increasing the cost of borrowing for businesses and consumers – is increasing the risks of a recession.
Virtually every sector has higher-than-normal inflation,” said Ethan Harris, head of economic research at Bank of America. It has entered every corner of the economy. That’s the most worrying thing, because it means it’s likely to continue.”
Gasoline prices are up 4% in May and nearly 50% in 12 months. They have increased more this month. The national average price was $4.99 per gallon (3.5 liters) on Friday, according to the AAA Automobile Association.
Grocery stores rose about 12% last month from a year earlier, their biggest jump since 1979. Restaurant prices rose 7.4%, the biggest jump since November 1981, reflecting rising food and labor costs.
Housing costs are also rising. The official index — which includes rents, hotel rates and a measure of the cost of owning a home — rose 5.5% in the year, the biggest jump since 1991. Airline ticket prices are up about 38%, the biggest increase since 1980.
Rampant inflation is putting severe pressure on families, forcing them to pay more for food, gas and rent and reducing their purchasing power for non-essential items, from haircuts to electronic gadgets. Low-income families, especially Hispanics and the black population, are hardest hit because they are forced to spend more of their income on basic necessities.
Economists expect a drop in inflation this year, though not by much. The CPI could drop to 7% by the end of the year. In March, the annual CPI was 8.5%, the highest level since 1982.
High inflation forced the Federal Reserve to implement the fastest series of interest rate increases in 30 years. With that said, the Fed hopes to cool spending and growth enough to rein in inflation without causing a recession.
Opinion polls show that for Americans inflation is the number one problem, and most of them disapprove of President Joe Biden’s handling of the economy. Republican lawmakers attack Democrats ahead of the November midterm elections.
(taken from the Los Angeles Times)