WASHINGTON (AP) – Prices for gas, food and most other goods and services jumped in May, raising inflation to a new high of four decades and giving American households no break from rising spending.
Consumer prices rose 8.6 percent last month from 12 months earlier, faster than the 8.3 percent rise in April from a year earlier, the labor ministry said on Friday. New inflation, the largest annual increase since December 1981, will increase pressure on the Federal Reserve to continue to aggressively raise interest rates.
On a monthly basis, prices jumped 1% from April to May, much faster than the 0.3% increase from March to April. Behind this jump are much higher prices for food, energy, rents, plane tickets and new and used cars.
The widespread increase in prices has also raised so-called “core” inflation, a measure that excludes volatile food and energy prices. In May, basic prices jumped sharply by 0.6% for the second month in a row and are now 6% higher than a year ago.
Rapid inflation in America is putting serious pressure on families, forcing them to pay much more for food, gas and rent, and reducing their ability to afford discretionary goods, from hairstyles to electronics. Lower-income Americans and blacks and Spanish-Americans, in particular, are struggling because, on average, more of their income is consumed by needs.
Some evidence in recent weeks has suggested that inflation may slow, especially for durable goods, which were caught in the turmoil and shortage of the supply chain last year. But that trend seems to have reversed in May, with used car prices rising 1.8 percent after falling for three months in a row.
Prices for new cars have also risen as a result of car production remaining hampered by a shortage of semiconductors. And clothing prices are rising after falling in April.
In light of inflation on Friday, the Fed is almost certain to make the fastest series of interest rate hikes in three decades. By sharply raising borrowing costs, the Fed hopes to cool spending and growth enough to curb inflation without driving the economy into recession. For the central bank, this will be a difficult balancing act.
The Fed has signaled that it will raise its key short-term interest rate by half a point – twice the usual increase – next week and again in July. Some investors had hoped that the Fed would then cut its interest rate increase to a quarter by a point when it meets in September, or perhaps even stop tightening its loans.
But with raging inflation, investors increasingly expect the Fed to rise by a third and a half points in September. These interest rate increases will mean sharply higher borrowing costs for consumers and businesses.
Surveys show that Americans see high inflation as a major problem for the nation, and most disapprove of President Joe Biden’s behavior toward the economy. Republicans in Congress are beating Democrats on the issue ahead of by-elections this fall.
Inflation remains high even as the sources of rising prices shift. Initially, strong demand for American goods, which remained at home for months after the COVID strike, caused shortages and upheavals in the supply chain and raised prices for cars, furniture and appliances.
Now that Americans are resuming spending on services, including travel, entertainment and dining, the cost of airline tickets, hotel rooms and restaurant food has risen. Russia’s invasion of Ukraine has further accelerated oil and natural gas prices. And as China eases COVID’s strict blockades in Shanghai and elsewhere, more and more of its citizens are fighting, raising oil prices even more.
Rising inflation has forced Rocky Harper of Tucson, Arizona, to start working on concerts for delivery companies, in addition to his regular full-time job with a package delivery service. His main job is $ 800 a week, he said, which “used to be very good money, but now it’s a little above the poor.”
Harper, 43, said he and his fiancée are postponing the marriage because they can’t afford it right now. They interrupted Netflix and Hulu. The catalyst for his car was recently stolen – an increasingly common theft – because of the rare metals it contains, which have jumped in price. The repairs will cost $ 1,300.
“With food, gas and rent – a holy cow,” he said. “I work a huge amount of overtime, just to succeed, just to get along.”
Commodity prices are expected to finally fall in the coming months. Many large retailers, including Target, Walmart and Macy’s, report that they are now left with too much patio furniture, electronics and other goods they ordered when these items were in greater demand and will have to give them up.
However, rising gas prices are undermining the finances of millions of Americans. Pump prices average nearly $ 5 a gallon nationwide and are close to the inflation-adjusted record of about $ 5.40 reached in 2008.
A study by the Bank of America Institute, which uses anonymous data from millions of customers ‘credit and debit card accounts, shows that gas costs eat up more of consumers’ budgets and push them to buy other items.
For lower-income households – defined as those with incomes below $ 50,000 – gas costs reached nearly 10% of all credit and debit card costs in the last week of May, the institute said in a report this week. This is up about 7.5% in February, a sharp increase in such a short period.
The costs of all the bank’s customers for durable goods, such as furniture, electronics and home improvements, have fallen compared to a year ago, the institute found. But their spending on airline tickets, hotels and entertainment continues to rise.
Economists cited the shift in spending on goods to services as a trend that should help reduce inflation by the end of the year. But with the constant rise in wages for many workers, prices are rising for services as well.
Add Comment