WASHINGTON (AP) — Costs for gas, food and other necessities likely soared in May, giving Americans no respite from the worst inflation spike in four decades.
Economists forecast that overall consumer prices jumped 8.2% last month from a year earlier, according to data provider FactSet. That would be barely lower than the 8.3% year-over-year rise in April and the 8.5% rise in March, the highest since 1982.
And on a monthly basis, prices are expected to have jumped 0.7% from April to May, up sharply from a 0.3% increase from March to April. The acceleration would almost certainly be due to gasoline prices, which had fallen in April but had jumped more than 10% in May alone and had since averaged nearly $5 a gallon nationally.
Rampant inflation in the United States is placing severe financial pressure on families, forcing them to pay significantly more for items such as food, gas and rent and reducing their ability to afford discretionary items, cuts hair to entertainment. Low-income and black and Hispanic Americans, in particular, are struggling because, on average, a greater proportion of their income is consumed by necessities.
High inflation has also forced the Federal Reserve into what will likely be the fastest round of interest rate hikes in three decades. By aggressively raising borrowing costs, the Fed hopes to cool spending and growth enough to rein in inflation without tipping the economy into a recession. For the Fed, this will be a difficult balancing act.
Polls show Americans see high inflation as the country’s biggest problem, and a substantial majority disapprove of President Joe Biden’s handling of the economy. Congressional Republicans are hammering Democrats on the issue ahead of the midterm elections in the fall.
Inflation has remained high even as the sources of rising prices have shifted. Initially, strong demand for goods from Americans who were stuck at home for months after the COVID-19 hit caused supply chain shortages and groans and drove up the prices of cars, furniture and appliances. Appliances.
Now, as Americans start spending on services again, including travel, entertainment and restaurants, the costs of airfare, hotel rooms and restaurant meals have skyrocketed. Russia’s invasion of Ukraine further accelerated oil and natural gas prices. And with China now easing strict COVID-19 lockdowns in Shanghai and elsewhere, more of its citizens are driving, driving up oil prices even further.
Still, Friday’s consumer inflation report may contain encouraging signs. Economists expect “core” inflation – which excludes volatile food and energy prices – to slow. On an annual basis, economists estimated that core prices rose 5.9% in May, compared to an annual rate of 6.2% in April. It would be the second consecutive month that this figure has weakened. Economists follow core inflation closely because it is considered a better indicator of future price changes.
The cost of used cars, which soared in 2020 and 2021 as semiconductor shortages sharply reduced the availability of new cars, has fallen for three straight months. And prices for clothing and household appliances both fell in April.
Property prices are expected to decline further in the coming months. Many large retailers, including Target, Walmart and Macy’s, have reported that they are now stuck with too much patio furniture, electronics and other goods they ordered when those items were in high demand and were in high demand. they will have to reduce them.
Even so, rising gasoline prices are eroding the finances of millions of Americans. Pump prices are averaging nearly $5 a gallon nationwide and are approaching the inflation-adjusted record high of about $5.40 set in 2008.
Research by the Bank of America Institute, which uses anonymous data from millions of their customers’ credit and debit card accounts, shows spending on gas is eating up more of consumers’ budgets and hampering their ability to buy other items.
For low-income households — defined as those with incomes below $50,000 — gas spending reached almost 10% of all credit and debit card spending in the last week of May, the institute said in a report. That’s up from around 7.5% in February, a big increase in such a short time.
Spending by all bank customers on durable goods like furniture, electronics and home renovations has plunged in the past year, the institute found. But their spending on airfare, hotels and entertainment continued to rise.
Economists have pointed to this shift in spending from goods to services as a trend that should help reduce inflation by the end of the year. But as wages rise steadily for many workers, prices also rise in services.