US May consumer prices rise by 5pc, fastest pace in 13 years

Business | 10 Jun 2021 10:32 pm

Consumer prices for May accelerated at their fastest pace in nearly 13 years as inflation pressures continued to build in the U.S. economy, the Labor Department reported Thursday, CNBC reports.

The consumer price index, which represents a basket including food, energy, groceries, housing costs and sales across a spectrum of goods, increased by 5 percent from a year earlier. Economists surveyed by Dow Jones had been expecting a gain of 4.7 percent..

The reading represented the biggest CPI gain since the 5.3 percent increase in August 2008, just before the financial crisis sent the U.S. spiraling into the worst recession since the Great Depression.

Though the inflation readings are well above anything seen since the 2008-09 financial crisis, the Federal Reserve has been largely dismissive of the numbers. Central bank officials believe the current rise is due to temporary factors that will abate as the year goes on and look higher because of comparisons to the year-ago period, when much of the economic activity remained restricted due to pandemic precautions.

Consequently, market participants generally do not expect to see the Fed react to the latest numbers when the policymaking Federal Open Market Committee meets next week.

“The strength in the top line indices was driven largely by categories that have been heavily disrupted by COVID and remain under pressure from supply chain disruptions,” wrote Eric Wingorad, senior economist at Alliance Bernstein. “The more persistent categories of inflation — the ones that do a better job of capturing the sustainable trend—are significantly more subdued. That means that the details of today’s print continue to support the idea that the spike in inflation is transitory, even if it is more intense than most forecasters (myself included) would originally have anticipated.”

Used cars and truck prices continued their climb higher, rising by 7.3 percent on the month and 29.7 percent for the past 12 months. The new vehicles index increased by 1.6 percent, its biggest-single month gain since October 2009 and was up by 3.3 percent for the 12-month period, the highest move since November 2011.

However, the energy index was about flat for the month despite the huge runup in gasoline prices this year, while the food index repeated its April rise of 0.4 percent.

The gasoline index is up by 56.2 percent over the past year, part of an overall 28.5 percent increase in energy during the period. Food prices have remained comparatively tame, up 2.2 percent for the 12-month period.

A separate gauge that excludes volatile food and energy prices increased by 3.8 percent, vs the Dow Jones estimate of 3.5 percent for so-called core inflation. That was the fastest pace since May 1992.

 



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