U.S. Consumer Price Index for May reaches 13-year high

The U.S. economy’s rebound from the pandemic has driven the consumer price index (CPI) to rise 5% in May on a year-over-year basis. This is the highest surge in inflation since 2008.

The core CPI, excluding food and energy, rose at the highest pace since 1992, to 3.8% from a year ago. The sharp 7.3% increase in used car and truck prices reportedly contributed to one-third of the rise in CPI. The price indexes for furniture, airline fares, and apparel also rose in May.

Relaxed business restrictions, increasing COVID-19 vaccinations, widespread federal pandemic relief programs, and better household savings have encouraged Americans to spend and travel more, reported Wall Street Journal (WSJ).

New vehicles have become more expensive due to the global semiconductor-chip shortage, bolstering the prices for used autos. Even rental-car prices have soared because companies sold off fleets as demand and travel fell during the pandemic. Airfares and hotel room rates are rebounding as consumers start traveling again.

Overall prices jumped at a 9.7% annualized rate over the three months ended in May reported WSJ. Overall prices rose a seasonally adjusted 0.6% and core prices rose 0.7%.

The repercussions of the increasing price rise are being faced by companies too, who are now slowly passing the higher input costs to consumers.

The rising consumer demand in the U.S. has led to the GDP reaching 6.4% at a seasonally adjusted annual rate in Q1. WSJ reported that the economy would grow at an 8.1% annual rate in Q2, paving the way for the best year since the early 1980s.

May’s CPI jump is greater than the 4.2% jump in April. This could trigger concerns surrounding inflation in America as the economy rebounds strongly from the pandemic.

Picture Credits: Financial Times