Inflation continued to surge in May, with consumer prices accelerating at the fastest pace in more than 12 years as the economy emerges from the pandemic, the feds said Thursday.
The Labor Department’s Consumer Price Index, which measures a basket of goods and services as well as energy and food costs, jumped 5 percent in May from a year earlier.
That’s higher than April’s 4.2 percent year-over-year rise in prices, and the biggest 12-month rise since August 2008, just before the financial crisis sent the US into the worst recession it had seen since the Great Depression.
Economists surveyed by Dow Jones expected a 4.7 percent spike in May.
Consumer prices rose 0.6 percent from the month prior on a seasonally adjusted basis, the Labor Department said.
The core consumer price index, which excludes volatile food and energy costs, rose 3.8 percent from a year ago, the fastest acceleration since 1992.
One driver of the massive annual gain is very low inflation this time last year, when the pandemic gutted the economy and consumers were staying indoors and spending less. That could distort year-over-year comparison as the economy reopens.
Those comparisons aside, prices are spiking throughout the economy for a variety of reasons. A global microchip shortage that’s hurt car manufacturing has sent the prices of used cars soaring.
Commodities from lumber to corn and other crops have risen dramatically, though some of those prices have begun to fall again in recent weeks. A labor shortage that’s preventing many businesses from fully reopening and meeting demand is also driving up some costs.
For now, the surge in prices appears to reflect rapidly strengthening consumer demand as Americans venture out of their homes after a year of social distancing and pandemic-related restrictions.
But the rise in costs is also fueling a debate among economists over whether the inflation bout will be temporary this summer or be here to stay.