Consumer prices in the United States increased more than expected in May, extending a months-long rise in inflation that risks becoming more established as the economy improves. The Labour Department’s announcement on Thursday showed that consumer prices rose at their quickest rate in almost 13 years in May, indicating that inflationary pressures in the US economy are still building.
After a 0.8 percent increase in April, which was the biggest since 2009, the consumer price index increased by 0.6 percent in May. According to Labour Department figures released on Thursday, the core CPI grew by 0.7 percent more than expected, excluding volatile food and energy components.
The increase was the most since August 2008, when the CPI increased by 5.3% shortly before the financial crisis drove the United States into the worst recession since the Great Depression.
Despite the fact that inflation readings are far higher than they have been since the financial crisis of 2008-09, the Federal Reserve has largely dismissed the figures.
The current increase, according to central bank officials, is attributable to temporary reasons that will fade as the year progresses and appear higher due to comparisons to the year-ago period when most economic activities were constrained owing to pandemic precautions.
As a result, when the governing Federal Open Market Committee meets, market participants do not expect the Fed to react to the recent data.
The gains were fueled by consistent increases in the prices of used cars, home furnishings, flights, and clothing.
According to the Labour Department, the increase in previously owned vehicles and trucks accounted for nearly one-third of the total monthly increase in the CPI. Price pressures are increasing across the economy as businesses try to balance a surge in demand with material and, in some cases, labour shortages. Companies seeking to protect profit margins face problems such as shipping bottlenecks, greater input costs, and growing wages.
According to another report released on Thursday, jobless claims for the week ending June 5 totalled 376,000. The figure was estimated to be around 370,000. The total still marked the lowest of the pandemic era.
Price pressure is expected to be transitory, according to Fed Chair, Jerome Powell, who stated in late April that “an episode of one-time price rises when the economy reopens is not the same as, and is not expected to lead to, persistently higher year-over-year inflation into the future.”
Others disagree, citing trillions of dollars in government assistance, the likelihood of goods shortages, and growing labour costs as reasons. Expectations for inflation over the next five years have eased somewhat from a 15-year peak last month, but they remain strong.
