Headline inflation soared 5% in May, the fastest year-on-year pace since 2008, as growing demand for the economy to reopen met supply chains choked by shortages.
Rising prices in the fragile heating economy continue to erode the purchasing power of consumers, according to the latest Bureau of Labor Statistics Consumer Price Index report, released Thursday morning.
Manufacturers cut back on production at the start of the pandemic and are now scrambling to catch up. This has led a wave of producers to relax their purchasing contracts and accumulate materials at the same time, sending limited products higher, raising input costs and passing higher prices on to consumers. Across the country, there is a shortage of everything from chicken wings to packets of ketchup, copper, wood, semiconductors, and furniture.
Grocery store prices skyrocketed during the pandemic shutdown in the spring of 2020, as shoppers stocked up and lean supply chains creaked under sudden demand nationwide. Prices have never returned to their pre-pandemic levels.
The average national price paid for 16 oz. of bacon rose to $ 5.40 in May, from $ 5.23 the month before, and higher than the $ 4.72 paid in January 2020, according to exclusive NielsenIQ supermarket outlets data.
Fresh ground beef hit $ 5.32 a pound in May, up from $ 5.27 in April, and above the pre-pandemic average cost of $ 5.02.
Chicken breasts fell to $ 3.14 from $ 3.20 in May, while remaining slightly above the $ 3.01 paid in January 2020.
Hikes were higher in some specific metropolitan areas. A pound of bacon in the New York metro area fell to $ 6.49 from $ 6.10 the month before, from $ 5.12 in January 2020. Bacon prices are also high in the San Francisco metro area. , up to $ 6.82 versus $ 6.55, and above the $ 5.71 paid in January 2020.
NBC News tracks a basket of groceries and updates an interactive data visualizer on a monthly basis.
“In a large basket of the most popular 5,000 items, shoppers are paying +0.4pt more for groceries in May 2021 compared to May 2020,” said Phil Tedesco, vice president of analytics at business intelligence at NielsenIQ.
Another hidden price hike is the decline in promotions. While the percentage of units sold on promotion is higher than it was a year ago, when discounts and coupons have all but disappeared with hot items on the shelves, they are still well below what they were in 2020.
“This indicates that shoppers are not able to take advantage of as many in-store discounts as during a pre-Covid period,” Tedesco said.
Experts say companies are likely to resort to price hikes over the summer to control demand, as the supply of goods – and the people to serve them – remain timid.
“I think we’re always going to have a hot summer when you get price hikes for everything from plane tickets to hotels,” Diane Swonk, chief economist at Grant Thornton, told CNBC.
The White House has said the inflationary effects are “transient” and will be offset by larger gains in the overall economy. The Federal Reserve has said it is willing to let inflation exceed the 2% target to help achieve full employment.
President Joe Biden’s recently released budget proposal projects the CPI to rise a modest 2.1% in 2022 and stabilize at 2.3% from 2024 to 2030.
“The budget certainly predicts that there will be some inflation in the near term, although we expect it to subside,” Cecilia Rouse, chair of the Council of Economic Advisers, told reporters at the meeting. a conference call last week.
“We expect that because of the policies, we’re going to have some GDP growth, which will benefit all Americans,” Rouse added. “We know that when you achieve full employment… everyone will benefit and the economy will benefit from the productivity-enhancing investments that are built into this budget.”
While most economists agree, one bank has warned that inflation could be more persistent than expected and have unintended consequences for precisely the groups the administration is trying to help.
“While it is admirable that this patience is due to the fact that the Fed’s priorities are shifting towards social goals, neglecting inflation leaves global economies sitting on a time bomb,” the economist wrote in Deutsche Bank chief David Folkerts-Landau and others in a report. Their analysis warned of soaring 1970s-style inflation that was only brought under control by high interest rate hikes, triggering a deep recession.
“The effects could be devastating, especially for the most vulnerable in society,” the company said.
The Fed said it believes it has several more specific tools in its kit to adjust the economy and change inflation in addition to general interest rates. Recently, he signaled that there may be an end to some of his bond purchases, which would tighten the currently loose money supply.