WASHINGTON: Prices for gasoline, food and other basic necessities jumped in May, pushing inflation to a new four-decade high and giving U.S. households no respite from the rise prices.
Consumer prices jumped 8.6% last month from 12 months earlier, faster than April’s surge of 8.3% year-on-year, the Labor Department said Friday.
Month-over-month, prices jumped 1% from April to May, a sharp rise from the 0.3% increase from March to April. Much higher gas prices were to blame for most of this increase.
Rampant inflation in the United States is putting great pressure on families, forcing them to pay far more for food, gas and rent and reducing their ability to afford discretionary items, from haircuts to ‘electronic.
Low-income and black and Hispanic Americans, in particular, are struggling because, on average, a greater proportion of their income is consumed by necessities.
Economists expect inflation to decline this year, but not by much. Some analysts have predicted that the inflation gauge released by the government on Friday – the consumer price index – could fall below 7% by the end of the year.
In March, the year-over-year CPI hit 8.5%, the highest rate since 1982.
High inflation has also forced the Federal Reserve into what will likely be the fastest round of interest rate hikes in three decades. By aggressively raising borrowing costs, the Fed hopes to cool spending and growth enough to rein in inflation without tipping the economy into a recession. For the central bank, this will be a difficult balancing act.
Polls show Americans see high inflation as the country’s biggest problem, and most disapprove of President Joe Biden’s handling of the economy. Congressional Republicans are hammering Democrats on the issue ahead of the midterm elections this fall.
Inflation has remained high even as the sources of rising prices have shifted. Initially, strong demand for goods from Americans who were stuck at home for months after the COVID hit caused supply chain shortages and groans and drove up prices for cars, furniture and appliances. .
Now, as Americans start spending on services again, including travel, entertainment and restaurants, the costs of airfare, hotel rooms and restaurant meals have skyrocketed. Russia’s invasion of Ukraine further accelerated oil and natural gas prices.
And with China easing strict COVID lockdowns in Shanghai and elsewhere, more of its citizens are driving, driving up oil prices even further.
Property prices are expected to decline in the coming months. Many large retailers, including Target, Walmart and Macy’s, have reported that they are now stuck with too much patio furniture, electronics and other goods they ordered when those items were in high demand and were in high demand. they will have to reduce them.
Even so, rising gasoline prices are eroding the finances of millions of Americans. Pump prices are averaging nearly $5 a gallon nationwide and are approaching the inflation-adjusted record high of about $5.40 set in 2008.
Research by the Bank of America Institute, which uses anonymous data from millions of their customers’ credit and debit card accounts, shows spending on gas is eating up more of consumers’ budgets and hampering their ability to buy other items.
For low-income households — defined as those with incomes below $50,000 — gas spending reached nearly 10% of all credit and debit card spending in the last week of May, the institute said in a report this week. That’s up about 7.5% in February, a big increase in such a short time.
Spending by all bank customers on durable goods, such as furniture, electronics and home renovations, has plunged in the past year, the institute found. But their spending on airfare, hotels and entertainment continued to rise.
Economists have pointed to this shift in spending from goods to services as a trend that should help reduce inflation by the end of the year. But as wages rise steadily for many workers, prices also rise in services.