Washington – American consumers absorbed another price hike in May – up 0.6% in April and 5% last year. This is the largest 12-month rise in inflation since 2008.
The May Consumer Price Index, released Thursday by the Labor Department, includes a variety of commodities that are currently in high demand as people increasingly participate in shopping, travel, dining and entertainment events in a rapidly recovering economy. It reflects the service.
Growing consumer demand has resulted in a shortage of parts that provide key products such as automobiles and computer equipment, from wood and steel to chemicals and semiconductors, all of which are driving up prices. As consumers move away from home, demand ranges from manufactured goods to services such as restaurant meals and hotel rates, as well as airfare, which are driving inflation in these regions.
In a report on Thursday, the government said core inflation, excluding volatile energy and food costs, rose 0.7% in May and 3.8% in the past 12 months after rising further in April. Specified.
From grain manufacturer General Mills to Chipotle Mexican Grill to paint manufacturer Sherwin-Williams – companies are raising prices or planning a price increase. Attract workers.
The inflationary pressures, which have increased over the months, not only put pressure on consumers, but also endanger the economic recovery from the pandemic recession. One risk is that the Federal Reserve will eventually respond to rising inflation by hitting rates too aggressively and disrupting economic recovery.
The Fed, led by Jerome Powell, repeatedly believes that inflation will only be temporary as supply bottlenecks are removed and parts and raw materials flow again. However, some economists have expressed concern that as the economic recovery accelerates, inflation will accelerate, driven by increasing consumer demand for free spending again.
How long is the problem?
“Price spikes can be bigger and longer as pandemics have disrupted the supply chain,” said Mark Zandi, chief economist at Moody’s Analytics, ahead of Thursday’s inflation report.
But “by autumn or by the end of the year,” Zandy suggested that “the price will return to earth”.
For consumers like Carmela Romanello Schaden, a real estate agent in Rockville Center, NY, that doesn’t stop anytime soon. Scheden said he had to pay more for various products in the hair salon. But she’s in the greatest financial pain in Food Isle. According to her, her monthly meals for her and her 25-year-old son are now between $ 200 and $ 250, up from $ 175 earlier this year.
The strip steak package, which Shaden normally bought for $ 28 to $ 32, jumped to $ 45. She noticed a spike just before Memorial Day but bought it anyway because it was for a family picnic. But she said she wouldn’t buy it again at that price and skip the pork and chicken.
“I was always picky,” said Schaden. “If something goes up, I’ll switch to another.”
So far, federal officials say rising inflation is a temporary consequence of accelerating consumer demand and a rapid resumption of the economy with a lack of supply and labor to keep up. It doesn’t differ from their point of view. Ultimately, they say that supply will increase to meet demand.
Officials also said inflation was measured in the early months of the pandemic, which makes the year-on-year inflation indicator look particularly large. In the months ahead, year-on-year inflation is likely to appear low.
Still, Fed vice chairman Richard Clarida admitted last month after the government reported that consumer prices had risen 4.2% in the twelve months to April. “I was surprised. That number was much higher than I and an outside forecaster expected.”
Inflation, which remains unaffected by the pandemic upheaval, has also risen since the beginning of the year.
Some economists say they are concerned that if prices tighten too much and stay high, expectations of further price hikes will prevail. As a result, the demand for higher wages can rise, creating a wage and price spiral that plagued the economy in the 1970s.
“The market is starting to worry that the Fed might curb inflation and that the spirit of inflation might come out of the bottle,” said Song Wong Sung, professor of economics and finance at Loyola Marymount University in Los Angeles. Said.
In April, prices for used cars and trucks rose 10%, a record high. Hotel and motel prices are also setting monthly records. Tickets for sporting events and home furniture have skyrocketed, as have televisions, audio products and smart home devices. Likewise the costs for toys, games and play sets. The tariffs for Uber and Lyft are also increasing.
Rising raw material costs have forced Americans to pay more for raw materials, which range from meat to gasoline. The prices for corn, grain and soy are at their highest level since 2012. The price of wood for building houses is higher than ever before. More expensive raw materials like polyethylene and wood pulp have resulted in higher consumer prices for most products sold in toilet paper, diapers and plastic containers.
General Mills is considering raising the price of its products as grains, sugar, and other ingredients have become more expensive. Hormel Foods has already raised the price of Skippy Peanut Butter. Coca-Cola expects to raise prices to offset rising costs.
Kimberly-Clark, a manufacturer of Kleenex and Scott toilet paper, announced that it will raise the price of its products by about 60%. Proctor & Gamble has announced that it will raise prices for baby, women’s and adult care products.
This week Chipotle Mexican Grill announced it would increase the price of its menu by about 4% to cover the cost of raising workers’ wages. In May, Chipotle announced that it would raise restaurant workers’ hourly wages to an average of $ 15 an hour by the end of June.
Gus Faucher, chief economist at PNC Financial, said: “Many companies are also under cost pressure, such as rising wages.”
Gregory Daco, chief US economist at Oxford Economics, suggested that prices for goods such as cars may have skyrocketed and car rental companies may have increased.
“At the peak of inflation, it will be a hot and humid summer,” said Dako. “There is a transition from rising raw material prices to rising service prices.”
Business journalist Anne D’Innocenzio contributed this report from New York.
Another price jump intensifies the pressure on US consumers Source link Another price jump intensifies the pressure on US consumers