U.S. consumer prices soar again and push inflation rate to 13-year high

KEY FACTS:

  • Rents rose 0.2% in May — the largest increase in more than a year.
  • Record prices for used cars and trucks was the biggest contributor to inflation last month. Prices climbed 7.3% after a 10% gain in April.
  • The cost of groceries rose 0.4% in May.
  • Americans are paying more for virtually everything: groceries, gas, appliances, sporting goods, used vehicles, auto insurance, vacation rentals and so on.

According to Market Watch the cost of living surged again in May and drove the pace of inflation to a 13-year high of 5%, reflecting a broad increase in prices confronting Americans as the economy recovers.

The consumer price index jumped 0.6% last month to mark the fourth large gain in a row, the government said Thursday. Soaring used-car prices accounted for one-third of the overall increase in May.

Economists polled by Dow Jones and The Wall Street Journal had forecast a 0.5% increase in the CPI.

Rising inflation has cast a shadow over the U.S. economic recovery as Americans pay higher prices for a variety of goods and services ranging from steaks to used cars to plane tickets, according to a closely followed consumer survey.

The second and final reading of the consumer sentiment index edged up a tick to 82.9 from an initial 82.8, the University of Michigan said Friday. But it was still down sharply from a 13-month high of 88.3 in April.

The worry among some inflation watchers is that part of the increase will get embedded in wages and prices and become harder to eradicate. The Fed would have to raise interest rates sooner than it wants and risk short-circuiting the economy in a worst-case scenario.

The cost of used vehicles, food, furniture, clothes, plane tickets, recreational goods, insurance and alcohol all rose according to Market Watch.

Record prices for used cars and trucks was the biggest contributor to inflation last month. Prices climbed 7.3% after a 10% gain in April.

The cost of groceries rose 0.4% in May. The bad news is prices are likely to keep going up for a while. The cost of packaging and farm crops have surged and producers and retailers are likely to try to pass those increases along to customers.

Americans got a bit of relief from energy prices, but it probably won’t last long. Energy prices were flat largely because of a small decline in gasoline prices.

Energy has been a big driver of the recent increase in inflation. They’ve climbed 29% in the past year.

A gallon of regular gas, for example, costs about $3.10 nationwide. The price had fallen to under $2 a gallon shortly after pandemic struck.

Rents rose 0.2% in May — the largest increase in more than a year — to nudge the increase over the past year up to 1.8%.

Rents have risen slowly partly because of government restrictions on evictions. What’s less clear is what will happen once the restrictions expire. Shelter is the single biggest cost for most consumers.

BIG PICTURE: Americans, as stated, are paying more for virtually everything: groceries, gas, appliances, sporting goods, used vehicles, auto insurance, vacation rentals and so on. It is eating away at their paychecks and some of their savings and the future of an economy that was expected to have a swift recovering is uncertain.