Eliminating food and energy costs, which would be highly volatile, would have kept inflation at 3.8% over that 12-month period. This is the largest increase since June 1992, known as major inflation.
Although the May price rise came faster than economists predicted, it is not entirely surprising, says Gailin Birch, a global economist at The Economist Intelligence Unit.
“The consumer price index hit a very low point during the corona virus crisis in the same month last year. This, coupled with the recent recent price growth in certain areas, means that the number of year-on-year inflation will inevitably be large,” he said in an email comment.
He expects inflation to fall again in the range of 2% to 3% in the second half of the year.
The used car market is on fire due to low interest rates, low rental cars, global chip shortages and the return of people who do not want to take public transport to work due to the epidemic. New car prices also rose 1.6% in May.
Although the May increase for the price index is driven by only a few categories, inflationary pressures are seen throughout the report.
For example, the cost of home decor, airfare, and clothing skyrocketed. Decorations recorded the largest monthly increase since January 1976.
Andrew Hunter, a senior U.S. economist at Capital Economy, wrote:
Economists worry that if prices continue to rise at such steep rates, consumers will stop buying. This would be very bad news for the US economy, which is running on consumer spending.
Energy prices – which contributed a lot to the increase in previous months – saw petrol prices fall in May and other energy products rise.
Despite investors worrying about high inflation for months, the stock market seemed to largely ignore Thursday’s report. The fear is that the pricing may force the Federal Reserve to reconsider its accommodation monetary policy position more than expected.