The Consumer Price Index for All Urban Consumers (CPI-U) increased 1 percent in May on a seasonally adjusted basis after rising 0.3 percent in April, the US Bureau of Labor Statistics (BLS) reported. Over the last 12 months, the all items index increased 8.6 percent before seasonal adjustment, the largest 12-month increase since the period ending December 1981.
The increase was broad-based, with the indexes for shelter, gasoline, and food being the largest contributors. After declining in April, the energy index rose 3.9 percent over the month while the gasoline index rose 4.1 percent and the other major component indexes also increased. The food index rose 1.2 percent in May as the food at home index increased 1.4 percent. Some states, including New York, have enacted temporary fuel tax holidays. There is hope by some that the Federal Government takes a similar action, though it is not a massive money saver.
Production and shipping backlogs tied to the Covid-19 pandemic have shown early signs of easing but remain pronounced, keeping products like cars and trucks (though fleets of all sizes in need of commercial assets should check out TruckTractorTrailer.com) in short supply. On top of that, the war in Ukraine is elevating food and fuel prices, and its trajectory is unpredictable.
Both Wall Street economists and small business owners increasingly worry that a recession is possible in the next year. That shaky consumer confidence combined with rising interest rates may be what is needed to cool off some of the hot demand and give supply a chance to catch up (retailers such as Target are even trading short term profits for inventory flexibility). If that is the case, the year should close out with a more moderate inflation rate.