Consumer prices up 5.0%, the largest annual increase since 2008
CPI Rose 0.6% in May on Higher Prices for New and Used Vehicles, Clothing, and Airfares; Now Up 5% Year over Year, MarketWatch666, Commenter RJS
The consumer price index rose 0.6% in May, as higher prices for new and used vehicles, clothing, airfares, car and truck rentals, and utilities were only slightly offset by lower prices for gasoline and for health insurance…the Consumer Price Index Summary from the Bureau of Labor Statistics indicated that seasonally adjusted prices averaged 0.6% higher in May, after rising by 0.8% in April. 0.6% in March, 0.4% in February, 0.3% in January, 0.2% in December, 0.2% in November, 0.1% in October, 0.2% in September, 0.4% in August, by 0.5% in July and by 0.5% in June, but after falling by 0.1% last May….the unadjusted CPI-U index, which was set with prices of the 1982 to 1984 period equal to 100, rose from 267.054 in April to 269.195 in May, which left it statistically 4.9927% higher than the 256.394 index reading of May of last year, which is reported as a 5.0% year over year increase, up from the 4.2% year over year increase reported a month ago, and the largest annual increase since 2008…with lower prices for gasoline holding back the overall index increase, seasonally adjusted core prices, which exclude food and energy, were up by 0.7% for the month, as the unadjusted core price index rose from 273.968 to 275.893, which left the core index 3.7976% ahead of its year ago reading of 265.799, which is reported as a 3.8% year over year increase, up from the 3.0% year over year core price increase that was reported for March, and the largest year over year core price index increase since May 1992 . . .
The volatile seasonally adjusted energy price index was unchanged in May, after falling by 0.1% in April, rising by 5.0% in March, by 3.9% in February, by 3.5% in January, by 2.6% in December, 0.7% in November, 0.6% in October, 1.4% in September, 0.9% in August, 2.1% in July, and by 4.4% in June, but after falling by 2.3% last May, and hence is still 28.5% higher than in May a year ago….the price index for energy commodities was 0.6% lower in May, while the index for energy services was 0.7% higher, after rising 1.5% in April….the energy commodity index was down 0.6% on a 0.7% decrease in the price of gasoline, which was slightly offset by a 2.1% increase in the price index for fuel oil, while prices for other energy commodities, including propane, kerosene, and firewood, were on average 0.6% higher…within energy services, the price index for utility gas service rose 1.7% after rising 2.4% in April and is now 13.5% higher than it was a year ago, while the electricity price index rose 0.3% in May after rising 1.2% in April….despite two straight decreases, energy commodities are still averaging 54.5% higher than their year ago levels, with gasoline price averaging 56.2% higher than they were a year ago, while the energy services price index is now up 6.2% from last May, as electricity prices are also 4.2% higher than a year ago…
The seasonally adjusted food price index rose 0.4% in May, after rising by 0.4% in April, by 0.1% in March, 0.2% in February, 0.1% in January and by 0.3% in December, after being unchanged in November, rising 0.2% in October, rising 0.1% in August and in September, after falling 0.3% last July, rising 0.5% last June, by 0.7% last May and by 1.4% last April, as the price index for food purchased for use at home was 0.6% higher in May, after rising 0.4% in April, while the index for food bought to eat away from home was 0.6% higher, as average prices at fast food outlets rose 0.5% and prices at full service restaurants rose 0.6%, while food prices at employee sites and schools averaged 1.2% higher…
In the food at home categories, the price index for cereals and bakery products was 0.4% higher, as average bread prices rose 0.9%, the price index for fresh biscuits, rolls, muffins rose 0.7%, the price index for breakfast cereals rose 1.3% and the price index for flour and prepared flour mixes also rose 1.3%….at the same time, the price index for the meats, poultry, fish, and eggs food group was also 1.3% higher, as the price index for beef and veal rose 2.3%, the price index for bacon and related products rose 1.8%, the price index for poultry rose 1.9%, and the price index for fish and seafood rose 2.2%….moreover, the seasonally adjusted price index for dairy products was 0.4% higher, as milk prices rose 2.2% even as the price index for ice cream was 0.6% lower…meanwhile, the fruits and vegetables price index was unchanged as the price index for fresh vegetables rose 0.5% while the price index for processed fruits and vegetables fell 0.2% and the price index for dried beans, peas, and lentils fell 0.6%….on the other hand, the beverages price index was 0.5% lower, as the price index for carbonated drinks fell 1.3% and the price index for noncarbonated juices and drinks fell 0.6%….lastly, the price index for the ‘other foods at home’ category was unchanged, as the price index for sugar and sweets rose 0.5%, the price index for fats and oils rose 0.8% and the price index for prepared salads rose 1.9%, while the price index for soups fell 0.7% and the price index for snack foods was 1.7% lower…the itemized list for price changes of over 100 separate food items is included at the beginning of Table 2 for this release, which also gives us a line item breakdown for prices of more than 200 CPI items overall…since last May, the only food line item showing a price change greater than 10% over the past year is bacon, which was 13.0% higher, while the price index for food at employee sites and schools is 34.4% lower on what was reported as a 43.5% year over year drop in the price index for food at elementary and secondary schools in March, but has not been itemized since…
Among the seasonally adjusted core components of the CPI, which rose 0.7% in May after rising 0.9% in April, 0.3% in March, 0.1% in February, being unchanged in January and December, after rising by 0.2% in November, by 0.1% in October, by 0.2% in September, by 0.3% in August, by 0.5% in July and by 0.2% in June, after falling by 0.1% in May of last year, the composite price index of all goods less food and energy goods was 1.8% higher in May, while the more heavily weighted composite for all services less energy services was 0.4% higher….
Among the goods components, which will be used by the Bureau of Economic Analysis to adjust March retail sales for inflation in national accounts data, the price index for household furnishings and supplies was was 0.9% higher, as the price index for living room, kitchen, and dining room furniture rose 2.1%, the price index for “other” furniture rose 2.7%, the price indices for floor coverings and window coverings also both rose 2.7%, and the price index for outdoor equipment and supplies rose 2.3%….at the same time, the apparel price index was 1.2% higher on a 1.5% increase in the price index for men’s suits, sport coats, and outerwear, a 3.6% increase in the price index for women’s outerwear, a 5.2% increase in the price index for girl’s apparel, and a 3.5% increase in the price index for boys’ and girls’ footwear….at the same time, the price index for transportation commodities other than fuel rose another 4.0% after jumping 4.3% in April, as prices for new cars and new trucks were both 1.6% higher, prices for used cars and trucks rose by a 7.3%, the price index for motor oil, coolant, and fluids rose 1.4%, and the price index for tires was 1.0% higher… however, the price index for medical care commodities was unchanged, as prescription drug prices fell 0.3% while nonprescription drug prices rose 0.7% and the price index for medical equipment and supplies rose 1.2%…meanwhile, the recreational commodities index was 0.4% higher on an average 0.9% increase in TV prices, a 1.5% increase in the price index for sporting goods, and a 1.9% increase in the price index for photographic equipment and supplies…moreover, the education and communication commodities index was also 0.4% higher on a 0.7% increase in the price index for educational books and supplies, a 1.0% increase in the prices index for computer software and accessories, and a 0.6% increase in the price index for computers, peripherals, and smart home assistants….lastly, a separate price index for alcoholic beverages was also 0.4% higher, while the price index for ‘other goods’ was 0.1% lower on a 1.1% decrease in the price index for cosmetics, perfume, bath, nail preparations and implements and a 0.2% decrease in the price index for stationery, stationery supplies, and gift wrap…
Within core services, the price index for shelter was 0.3% higher as rents rose 0.2%, homeowner’s equivalent rent was 0.3% higher, and prices for lodging away from home at hotels and motels rose 0.4%, while at the same time the shelter sub-index for water, sewers and trash collection rose 0.1%, and other household operation costs were on average 3.1% higher on a 6.4% increase in the price index for domestic services and a 5.5% increase in the price index for moving, storage, freight expenses…on the other hand, the price index for medical care services was 0.1% lower because the price index for health insurance fell 1.0%….but the transportation services price index was 1.5% higher as car and truck rentals rose 12.1%, the price index for airline fares rose 7.0%, the price index for parking fees and tolls rose 1.3% and the price index for vehicle insurance rose 0.7%…in addition, the recreation services price index rose 0.2% as the index for veterinarian services rose 1.2% and the price index for admissions to sporting events rose 1.5%…. at the same time, the index for education and communication services was also 0.2% higher as the price index for land-line telephone services rose 1.1%, the price index for elementary and high school tuition and fees rose 0.9% and the price index for delivery services rose 0.4%…lastly, the index for other personal services was 0.1% lower as the price index for haircuts and other personal care services was 0.6% lower while the price index for financial services fell 0.3%…
Among core line items, the price index for car and truck rental, which has now risen 109.8% from a year ago, the price index for used car and trucks, which is now up 29.7% from a year ago, the price index for airline fares, which is up 24.1% since last May, the price index for ther intercity transportation, which is up 11.1% over the same span, the price index for men’s pants and shorts, which is now up 12.3% from a year ago, the price index for women’s dresses, which has risen by 10.3% over the past year, the price index for jewelry, which is now up 14.7 from a year ago, the price index for lodging away from home including at hotels and motels, which has now risen 10.0% in the past year, the price index for domestic services, which has risen 13.7% year over year, the price index for moving, storage, freight expense, which is up by 16.2% over the last 12 months, the price index for laundry equipment, which is up 26.5% from last May, and the price index for “other furniture”, which is up 11.4% year over year, have all seen prices rise by more than 10% over the past year, while the price index for telephone hardware, calculators, and other consumer information items, which is now down by 19.1% since last May, is the only core line item to have decreased by a double digit magnitude over that one year span….
May 2021 Consumer Price Index Shows Fastest Inflation Since 2008 – The New York Times (nytimes.com)
What meat, clothing and five other everyday items tell us about inflation https://www.bostonglobe.com/2021/06/12/business/what-meat-clothing-five-other-everyday-items-tell-us-about-inflation/?event=event25
A more accurate inflation indicator is painting a bleaker picture for rising prices (msn.com)
“…What to watch
Of course, some CPI metrics do tell the real story. For example, prices for used cars and trucks climbed almost 30%, while prices for new vehicles rose just 3.3%. This is significant. When used vehicle prices soar, they have an outsized impact on some consumers’ economic health.
Interestingly, markets, as a whole, seemed unfazed by the report. This may suggest that concerns about inflation are subsiding or are already baked into investors’ expectations. There was no kneejerk stock sell-off as there was in April. The response from the bond markets was curious as the 10-year yield closed 3 basis points lower after already falling 13 basis points over the last week.
Does this really mean that the inflation scare is over? A close look at the Producer Price Index suggests otherwise.
This less-heralded government indicator may be the better metric for determining if we’re heading into an inflationary environment. Unfortunately for consumers and investors alike, the PPI is flashing even more warning signs than its CPI brethren.
The PPI tracks the domestic production of goods and services, capturing the pricing pressure that producers are seeing from their suppliers that, in turn, are passed on to consumers.
In April’s PPI report, final demand — prices received by producers upon last sale — rose 6.2%, the highest jump since the Bureau of Labor Statistics began calculating and reporting annual data in November 2010…”
Of course the more important matter at this time is whether the Fed should raise interest rates to dampen future inflation. The answer is NO. Inflation at times of economic readjustment is a particularly versatile lubricant to loosen sticky prices. In the longer run then what matters most is that real wages do increase and that after the necessary period of readjustment then prices are stabilized.
Not a wage-driven inflationary cycle. Supply chain and material led inflationary cycle. Interest increase will not curb such.
Understood on the cost driven versus demand driven, but increased Fed rate drives prime rate affecting commercial borrowing more than it drives VISA interest rates. Mortgage and HELOC rates are caught up in the interbank rate though, but not much general consumption is paid for by that channel. Wages pay current purchases and monthly utility bills, credit cards, and mortgages. If houses are sold out then that channel should be slowing down even with low interbank interest rates.
Fed Rates will not fix a supply chain issue. To talk about Fed Rates confuses the issue of a lack of capacity to meet demand for new and old product. We went through this in 2010 with semi-conductors. Once the established capacity was brought on line, demand was satisfied and prices decreased as there were alternatives. Albeit, some of the alternatives had to be tested and cleared with the customer; it still was a solution to shortages once capacity was established. This is a short term issue.
Raising prices for a product which has not increased in cost is simply rent taking. It will work out in the short term of months.
Read my comment to NDd in “The Spike in Inflation” post. He is discussing the same.
Also in this semi-post-pandemic world then one would expect some demand pull along with the cost push price inflation as demand for a lot of stuff had been placed on hold, pent up as it were.
However, wage cost push is the one thing that we are not seeing but would like to see even though wage cost push inevitably marries demand pull driven by higher wages.
Increasing short term lending rates can reduce demand and thereby price, but of course it cannot fix supply chain issues. Where increased investment were needed to fix supply chain issues then it would worsen supply chain issues. Reducing demand reduces price AND reduces investment. This might be why I lead off with “whether the Fed should raise interest rates to dampen future inflation. The answer is NO.” The PPI also says exactly what you are saying in its own way rather than your own way. Have a nice day your way. I am mowing a acre today.
Doing it by walking behind a 60 inch deck will give you some good exercise.
Ford, Chrysler, GM will pay the price to meet demand. It won’t reduce there forecasted need even if the vehicle sits on the lot for 3 months. They will eat the difference. And they will make the same mistake in the future just like they did in 2008 and recently.
The shocking thing about shocks is that not all shocks shock the same. The Nixon oil shock was in a sense narrow, but due to the broad range of economic uses for oil was indeed a broad systemic shock. The second order effect was to reduce demand from reduced labor demand due to oil price. Although it dominated the US economy during the 70’s, it was not the only shock in town. There was a technology shock reducing employment while increasing pay for the luck few nerds that woke up on the right side of the shock.
The global pandemic shock of the last two years had few winners (Google, Amazon, and FedEx for sure), but a vast array of losers and effects beyond simple secondary. Inflation should be the least of our worries now.
Why walk when you can ride?
I have a 2003 SCAG model STHM with a 61 inch deck. It has the advantages of a walk behind such as forward cutting deck and operator far to the rear, which is for cutting under trees and shrubs while eating a minimum of branches. They have not been made for several years now. My dealer has two himself. They are the best mower ever made. Riding a trolley on a walk behind is for yards that are as smooth as putting greens. My mower is after all a golf course mower, so cutting my yard with it is practically child abuse.
I need to exercise more than one day out of 7 to 10 or even longer if we are really going back to drought conditions. The last two years we had record rainfall, so I cut one day out of every six. Living in the low country and coming out of two years of record rainfall then a summer drought will not keep me out of the pool. Rather it will keep me in the pool. Way better exercise that breaking my ankle with a walk behind mower.