TOPLINE
Consumer prices rose 8.6% in the 12 months ending in May, unexpectedly returning to record levels—and climbing at the quickest pace in four decades—amid an unprecedented surge in gas prices.
KEY FACTS
Overall prices rose 1% from April—surpassing the 0.7% economists were expecting and much higher than the previous month’s increase of 0.3%, according to data released by the Labor Department on Friday.
The unexpected jump marks the largest 12-month increase since the period ending December 1981, according to the release, and comes after prices in April fell on a monthly basis for the first time since August.
The overall increase was the result of broad upticks across shelter, food and gas prices, which jumped 4% after falling 6.1% in April, the government said.
“So much for the idea that inflation has peaked,” Bankrate Chief Financial Analyst Greg McBride said in emailed comments after the report, noting that increases were “nearly ubiquitous.”
Core inflation, which excludes volatile food and energy prices, rose 0.6% in May against an expectation of 0.5%; shelter prices rose at the fastest pace in 31 years while food prices climbed at the largest rate in more than 41 years.
Stock futures immediately fell after the worse-than-expected report, with the S&P 500 reversing early gains and falling 1.6% below Thursday’s closing level in premarket trading.
SURPRISING FACT
In another concerning sign, used car prices, which McBride says “had been the ray of hope for easing price pressures” after three straight months of declines, jumped 1.8% for the month of May.
KEY BACKGROUND
Rising energy prices have elevated inflation readings during the pandemic to the highest level in decades, and stocks have struggled in recent months as Federal Reserve officials work to combat the surge by unwinding the central bank’s pandemic-era stimulus measures. After rising 27% in 2021, the benchmark S&P 500 has tumbled 16% this year. Meanwhile, oil prices have surged more than 15% over the past month with demand expected to spike this summer—adding to supply concerns spurred by intensifying sanctions against Russia, one of the world’s top oil-producing countries.
CRUCIAL QUOTE
“Any hopes that the Fed can ease up on the pace of rate hikes after the June and July meetings now seem to be a long shot,” says McBride. “Inflation continues to rear its ugly head and hopes for improvement have been dashed again.”
FURTHER READING
$5 Milestone: Gas Prices Hit An All-Time National High (Forbes)