American consumers are facing another month of steep price increases. The larger question: How many more months — or even years — of steep price increases will hit their pocketbooks as the U.S. economy recovers from the pandemic?
Consumer prices rose 0.6% in May, and 5% over the last 12 months, the Labor Department said on Thursday. It's the fastest rate of increase since August 2008, reflecting growing demand as consumers shop, travel and dine out in a reopening economy.
Prices for used cars and trucks drove the increase, growing 29% over the last year, while energy prices grew 28.5% in the last 12 months. Transportation services increased 11.2% in the last 12 months.
"There is stronger demand for hotel rooms, air travel, restaurant dining," Gus Faucher, chief economist at PNC Financial, told the Associated Press. "Many businesses are also facing upward pressure on their costs such as higher wages."
"The price spikes could be bigger and more prolonged because the pandemic has been so disruptive to supply chains," Mark Zandi, chief economist at Moody's Analytics, told the AP. He expected to see a price drop "by the fall or end of the year," he told the AP.
Food prices also increased, though at a more muted rate. Food away from home grew 4% over the past year; food at home grew 0.7%.
The high numbers are unlikely to rattle the Federal Reserve and the Biden administration, both of which have argued that price increases will be temporary as the economy heals from last year's pandemic-induced slump.
Core inflation is up 3.8% over the past 12 months, the government said in Thursday's report. Some economists consider the measure a more reliable measure of price changes because it leaves out volatile food and energy prices.
Officials also note that year-over-year gauges of inflation now look especially large because they are being measured against the early months of the pandemic, when inflation tumbled as the economy all but shut down. In coming months, the year-over-year inflation figures will likely look smaller.
"We believe this will be the peak in the annual rate of inflation as the strong base effects subside in the coming months," economists at Oxford Economics said in a research note.