In June, US inflation rose to a new 40-year high of 9.1 percent.
May saw an increase in the price of gas, food, and other necessities, pushing inflation in the US to a new four-decade high and leaving American households with no relief from rising prices.
According to data released on Friday by the US Department of Labor, consumer prices increased 8.6% over the previous year, outpacing April’s 8.3% increase.
Prices increased by 1 percent on a monthly basis from April to May, a sharp increase from the 0.3 percent rise from March to April. The majority of that increase was caused by significantly higher petrol prices.
Families in the US are under tremendous pressure as a result of the country’s raging inflation, which has caused them to pay significantly more for food, gas, and rent while also having a harder time affording discretionary items like electronics and haircuts. Americans with lower incomes, as well as those who are Black or Hispanic, are particularly struggling because, on average, a larger portion of their income is spent on necessities.
On Friday, US Vice President Joe Biden was scheduled to speak at the busiest US port, the Port of Los Angeles, and address price increases. Numerous ships have been waiting outside for more than a year as COVID restricted the number of ships that could unload, disrupting supply chains.
Despite their limited expectations, economists do expect inflation to decrease this year. According to some analysts, the consumer price index, the inflation indicator the government released on Friday, may fall below 7 percent by the end of the year. The year-over-year CPI rose to 8.5 percent in March, the highest level since 1982.
Additionally, the Federal Reserve has been forced to raise interest rates quickly for the first time in thirty years due to high inflation. The Fed intends to aggressively raise borrowing costs in an effort to restrain spending and growth just enough to contain inflation without sending the economy into a recession. It will be a difficult balancing act for the central bank.
According to polls, Americans believe that the country’s biggest issue is high inflation, and the majority of them think that Biden has handled the economy poorly. In the lead-up to the upcoming midterm elections later this year, congressional Republicans are hammering Democrats on the subject.
Despite a change in the sources of price increases, inflation has remained high. In the beginning, there were shortages and supply chain snarls due to the strong demand for goods from Americans who were stranded at home for months after COVID struck, which led to an increase in the price of cars, furniture, and appliances.
The price of airline tickets, hotel rooms, and restaurant meals have increased as Americans start to spend money again on services like travel, entertainment, and dining out. Oil and natural gas prices have increased further as a result of Russia’s invasion of Ukraine. Additionally, as more of its citizens drive as a result of China relaxing its strict COVID lockdowns in Shanghai and other cities, the price of oil has increased even further.
Prices for goods are anticipated to decrease in the upcoming months. Numerous big-box stores, such as Target, Walmart, and Macy’s, have stated that they now have an excess of the patio furniture, electronics, and other products that they ordered when those items were in higher demand and will have to mark them down.
Nevertheless, the finances of millions of Americans are being ruined by rising gas prices. The national average for gas prices is currently around $5 per gallon ($1.32 per litre), which is getting closer to the inflation-adjusted record of around $5.40 ($1.42 per litre) set in 2008.
Gas purchases are consuming a larger portion of consumer budgets and limiting their ability to purchase other items, according to research by the Bank of America Institute, which uses anonymous data from the credit and debit card accounts of millions of their customers.
According to a study released this week by the institute, gas purchases accounted for nearly 10% of all purchases made with credit and debit cards in the final week of May for lower-income households, which are those with incomes under $50,000. That represents a significant increase in such a brief period from roughly 7.5 percent in February.
According to the institute, spending by all of the bank’s customers on durable goods, such as furniture, electronics, and home improvement, has decreased from a year ago. However, they have continued to increase their spending on hotels, entertainment, and travel.
According to economists, this trend of shifting spending from goods to services should help reduce inflation by year’s end. However, prices for services are also rising as a result of many workers’ wages steadily increasing.