U.S. inflation hit 8.6% in May, the highest year-over-year increase since 1981. It’s a figure driven largely by continued increases in the cost of basic necessities, according to new federal reporting.
The overall jump in prices for consumer goods and services takes the inflation rate back to 40-year highs after a brief dip in April.
The Consumer Price Index report, released by the U.S. Department of Labor on Friday, found the price increases were broad-based, with the indexes for shelter, gasoline and food being the largest contributors. After declining in April, the energy index rose 3.9% over the month with the gasoline index rising 4.1% and the other major component indexes also increasing. The food index rose 1.2% in May as the food at home index increased 1.4%.
U.S. gas prices hit an all-time record on Friday, with AAA reporting the national average price for a gallon of regular is now $4.99. Utah is also seeing its own record highs, with residents across the state now paying an average $5.01 per gallon.
Mountain West states, which include Utah, continued to have some of the highest regional inflation in the country with the average prices of goods and services rising 9.4% in May, down from April’s 9.8% uptick.
U.S. consumers are now paying for groceries that are up 11.9% over last year, gas that’s up 48.7% over 2021 and shelter expenses that have risen 5.5% since May, 2021.
Prices of new and used vehicles also continue to surge, up 12.6% and 16.1%, respectively.
America’s rampant inflation is imposing severe pressures on families, forcing them to pay much more for food, gas and rent and reducing their ability to afford discretionary items, from haircuts to electronics. Lower-income and Black and Hispanic Americans, in particular, are struggling because, on average, a larger proportion of their income is consumed by necessities.
Economists do expect inflation to ease this year, though not by very much. Some analysts have forecast that the inflation gauge the government reported Friday — the consumer price index — may drop below 7% by year’s end. In March, the year-over-year CPI reached 8.5%, the highest such rate since 1982.
High inflation has also forced the Federal Reserve into what will likely be the fastest series of interest rate hikes in three decades. By raising borrowing costs aggressively, the Fed hopes to cool spending and growth enough to curb inflation without tipping the economy into a recession. For the central bank, it will be a difficult balancing act.
Surveys show that Americans see high inflation as the nation’s top problem, and most disapprove of President Joe Biden’s handling of the economy. Congressional Republicans are hammering Democrats on the issue in the run-up to midterm elections this fall.
Research by the Bank of America Institute, which uses anonymous data from millions of their customers’ credit and debit card accounts, shows spending on gas eating up a larger share of consumers’ budgets and crowding out their ability to buy other items.
For lower-income households — defined as those with incomes below $50,000 — spending on gas reached nearly 10% of all spending on credit and debit cards in the last week of May, the institute said in a report this week. That’s up from about 7.5% in February, a steep increase in such a short period.
Contributing: Associated Press