In May, core prices increased 0.6% for the second consecutive month and 6% in a year. Photo: Los Angeles Times
Inflation in the United States reached its highest level in 40 years, after the prices of gasoline, food and other basic products increased in May. Consumer prices rose 8.6% in May from the same month a year earlier, surpassing the 8.3% rise in April, the Labor Department reported Friday.
Prices increased 1% from April to May, compared to 0.3% from March to April. Most of the increase was due to gasoline.
The widespread rise in prices was also recorded in so-called “core” inflation, a measure that excludes volatile food and energy prices. In May, core prices increased 0.6% for the second consecutive month and 6% in a year.
Friday’s report highlighted fears that inflation goes far beyond rising energy prices stemming from clogged supply chains and the Russian invasion of Ukraine. And mounting pressure on the Fed to keep raising interest rates—increasing the cost of borrowing for businesses and consumers—raises the risk of recession.
Announcement
“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 is the most worrying thing, because it means that it will probably persist.”
Gasoline prices increased 4% in May and almost 50% in 12 months. They have increased even more this month. The national average price hit $4.99 a gallon (3.5 liters) on Friday, according to the AAA automobile association.
Groceries rose nearly 12% last month from a year earlier, their biggest jump since 1979. Restaurant prices increased 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 how much it costs to own a home — rose 5.5% in the year, the biggest jump since 1991. Airfares rose nearly 38%, the biggest increase since 1980. .
Rampant inflation puts serious pressures on families, forcing them to pay much more for food, gas and rent and reducing their purchasing power of non-basic items, from haircuts to electronic gadgets. Low-income households, particularly Hispanics and the black population, are the hardest hit because they must spend more of their income on basic necessities.
Economists forecast a reduction in inflation this year, although not by much. The consumer price index could drop to 7% by the end of the year. In March, the annual CPI was 8.5%, the highest since 1982.
High inflation has forced the Federal Reserve to implement the fastest series of interest rate hikes in 30 years. With it, the Fed hopes to cool spending and growth enough to curb inflation without triggering a recession.
Polls show that for Americans, inflation is the number one problem, and most disapprove of President Joe Biden’s handling of the economy. Republican lawmakers attack Democrats ahead of midterm elections in November.
(Taken from the Los Angeles Times)