Inflation unexpectedly hit a new 40-year high in May as gasoline, food and rent prices surged, underscoring that its anticipated decline could be painfully slow.
The consumer price index rose 8.6% a year from 8.3% the previous month and the biggest rise since December 1981, the Labor Department said on Friday.
On a monthly basis, consumer prices rose 1%, compared to a 0.3% increase the previous month.
After inflation fell from its recent four-decade high in April, economists believed it had begun an extremely slow descent. May’s return to historic highs reveals how unsolvable it has become as a wide range of goods and services surged.
Gasoline prices are up 4.1% and 48.7% annually, while grocery prices are up 1.4% and 11.9% over the past year . Russia’s war in Ukraine has continued to reduce the world’s supply of oil, wheat, corn and other commodities and to expand supply chain problems.
Core prices, which exclude volatile food and energy products, rose 0.6% for the second month in a row. This reduced the annual rise to 6% from 6.2% in April.
Rents have increased by 0.6% and 5.2% over the past year. The sharp rise in house prices during the pandemic has prompted landlords to raise rents to maintain their profits.
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There is good news in the report.
Consumer purchases have started to shift from goods to services, such as restaurants and travel, now that the pandemic is largely easing.
Additionally, many port, factory and truck workers are returning to work and China is easing COVID-related lockdowns, easing the supply chain bottlenecks causing much of the surge in inflation. And retailers who have ordered too much stock to cope with supply grunts are sharply discounting some items.
As a result, commodity prices are rising more slowly or in some cases falling as buyers reduce their pandemic-fueled buying sprees. Last month, prices fell 0.2% for furniture, 0.7% for appliances and 4.1% for televisions.
But used car prices, which fell the previous two months after soaring during the health crisis, jumped 1.8% and 16.1% annually. New car prices rose 1% and 12.6%. annual.
Meanwhile, strong demand for travel and other leisure activities is driving up another round of prices. Air fares jumped 12.6% and rose 37.8% last year. And hotel rates have increased by 0.9% and 19.3% per year.