Consumer prices jumped 5 percent annually in May
Consumer prices rose 5 percent in the 12 months leading up to May, a finding that is higher than expected and certain to raise concerns about inflation that are already being voiced by policymakers in Washington.
The consumer price index (CPI), a closely watched gauge of inflation, rose at the fastest annual rate since 2008 as suppliers struggled to keep up with sharply rising demand, according to data released Thursday by the Bureau of Labor Statistics (BLS).
The new inflation data comes as President Biden and the Federal Reserve face increasing pressure to act on inflation.
Economists have long expected inflation to temporarily spike as the U.S. economy moved toward fully reopening. It’s possible the bump is a temporary surge linked to the coronavirus pandemic that massively hit the economy just more than a year ago.
Financial markets, which are often sensitive to higher-than-expected jumps in inflation, shook off the report. Dow Jones Industrial Average futures projected an opening gain of 150 points after the BLS data was released
Republican lawmakers and fiscal hawks, however, have argued that the combination of Biden’s March stimulus bill, monetary stimulus from the Fed and potential future spending could force the U.S. into an inflationary spiral.
They are likely to seize on the new numbers as evidence that Biden’s policies are likely to drive inflation.
The BLS pinned most of the increase on supply chain bottlenecks and a quick snapback of consumer demand for certain goods and services that pushed prices much higher.
Prices for used cars and trucks soared more than 7 percent between April and May, making up one-third of the total increase in the CPI. There has been intense demand for used cars in 2021 as rental companies rush to replace fleets they liquidated in 2020.
Food prices rose 0.4 percent, thanks largely to a 2.3 percent rise in beef prices, while declines in gasoline prices offset increases in electricity and natural gas prices.
Overall, the BLS said many of the forces responsible for April’s increase persisted through May, including household furnishings and operations, airline fares, and apparel — all of which have seen sharp increases in demand since the start of 2021.
The CPI minus food and energy prices, which are more regularly volatile, rose 3.4 percent annually in May, 1.4 percentage points above the Federal Reserve’s annual inflation target as measured by a similar index.