Inflation rose at an annual rate of 8.6% in May
The cost of living jumped in May as the Labor Department’s consumer price index (CPI) rose one percentage point from April. Over 12 months, inflation in May increased by 8.6%; this is the largest increase since December 1981.
Consumers won’t be surprised that gasoline, food and housing drove the increase. After declining in April, the energy index rose 3.9% during the month, with the gasoline index increasing 4.1% and the other major component indices also increasing.
The cost of food rose 1.2% last month, and the cost of groceries rose 1.4%. The core inflation rate, excluding the cost of energy and food, rose 0.6% in May, about the same as in April.
Although nearly all major economic fundamentals rose during the month, the main contributors were housing costs, airline tickets, used cars and trucks, and new vehicles. The indices for medical care, household furnishings and operation, recreation and clothing also rose in May.
Consumers cannot avoid food and energy costs
Even if the core CPI inflation rate removes food and energy from the equation, Yoni Mazor, chief growth officer at GETIDA, says consumers cannot avoid these costs.
“I think gas and food play a disproportionate role in inflation, because of the daily effect they have on consumer spending and layers of the economy,” Mazor told ConsumerAffairs. “People can’t avoid buying food, whether it’s at the supermarket, at convenience stores or at restaurants.”
Over the past 12 months, gasoline prices have increased by 48.7%. Prices for food purchased from grocery stores and prepared at home rose 11.9%.
None of the categories measured by the CPI fell last month. The most moderate increase was for medical services, which increased by 0.4%.
Naoshad Pochkhanawala, financial planner at Amiko Benefits Inc., says rising inflation makes a recession more likely.
“As inflation rises, people tend to spend less on non-essential things, so less money is circulating in the economy and that means businesses earn less or fail,” he told us. . “That means there’s even less money to spend on non-essential things, so there’s even less money circulating in the economy, so businesses selling non-essential things…eh well, you can see where the cycle ends.”
But there is no consensus among economists on the inevitability of a recession. Economists polled by Forbes say worries about a recession are “overblown”. However, they admit that it all depends on consumers’ ability to keep spending.