Inflation was soaring in May that consumer prices hit a new four-decade high, exacerbating financial tensions for millions of Americans and exacerbating the political crisis for President Biden.
The Labor Department said on Friday that the consumer price index, a broad measure of the price of everyday goods, including petrol, food and rent, rose by 8.6% in May from a year ago. Prices rose 1% in April within a month. These figures were higher than the 8.3% and 0.7% monthly profit forecast by Refinitive economists.
CHRONOLOGY OF INFLATION: THE RESPONSE OF ROAD ADMINISTRATION TO FAST PRICE GROWTH
marks The fastest pace of inflation Since December 1981.
Base prices, which exclude more variable food and energy measurements, rose 6% from the previous year, even more than expected by Refinitive. Base prices also rose by 0.6% month-on-month, suggesting that underlying inflationary pressures remain strong.
“What an ugly print CPI. Not only was it higher than expected on almost every front, the pressures were clearly evident in the sticky parts of the market,” said Seema Shah, chief strategist at Principal Global Investors. “The decline in inflation, whenever that eventually happens, will be a slow pain.”
Price increases were very widespread: energy prices rose by 3.9% in May compared to the previous month, 34.6% more than last year. Gasoline is on average 48.7% higher than a year ago and 7.8% higher than in April. Overall, fuel prices rose by 16.9% month-on-month in May, pushing a year-on-year rise to a staggering 106.7%.
In another worrying sign, shelter costs, which accounted for about a third of the CPI, accelerated in May by 0.6%. He had the fastest gain in a month since 2004. Over the year, shelter costs rose by 5.5%, the fastest since February 1991.
Food prices also rose by 10.1% year-on-year and by 1.2% month-on-month, with the largest increases in dairy products and related products (2.9% increase, the highest monthly increase since July 2007), non-alcoholic beverages (1.7% ). cereals and bakery products (1.5%) and meat, poultry, fish and eggs (1.1%).
Heat inflation has put severe financial pressure on most U.S. households, who are forced to pay more for their daily needs, such as food, gas, and rent. The burden of disproportionately low-income Americans is borne by the fact that already extended wages are heavily affected by price fluctuations.
Rising prices have been fueling strong earnings for U.S. workers in recent months, with average hourly earnings falling 0.6% in May compared to the previous month, as rising inflation eroded total earnings of 0.3%, according to the Department of Labor. Over the year, real earnings fell by 3% in May.
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Violent inflation has become a major political issue for Biden ahead of the mid-November election, as Democrats are expected to lose a majority that is already bizarre. According to opinion polls, Americans see inflation as the country’s biggest problem, with many homes blaming Biden for rising prices.
A warmer-than-expected report will have far-reaching consequences for the Federal Reserve, which is likely to reinforce some aggressive rate hikes as central bank officials try to control inflation. Policy makers have already raised the basic interest rate by 50 points in May – twice the usual size – and are expected to approve at least two more increases of the same size in June and July.
98% of investors expect the Fed to see another mid-rate hike in September as inflation continues to be stubborn, according to the CME FedWatch tool.
However, the Fed is in a precarious situation, with consumer demand and inflation approaching its 2% target, without leading to a recession. Mountain rates tend to create higher rates on consumer and business loans, which slows down the economy by forcing employers to cut spending.
“The Fed is now between a rock and a very hard place,” said Peter Earle, an American researcher at the Institute for Economic Research. “Acting more aggressively to stop the rise in prices increases the likelihood of a recession.”