gas pump

The pain of higher prices continues for US consumers.

Record gas prices drove inflation to 8.6% for the 12 months ending in May, higher than the pace in April, according to the latest Consumer Price Index, the government’s basic inflation measure.

The reading for core CPI, which strips out volatile food and energy prices, posted a 6% increase over the same period, higher than the previous month’s level. Both readings are among the biggest jumps in prices experienced by consumers since 1981.

Energy prices overall rose 34.6% compared to a year ago, driven by a nearly 50% jump in gas prices over the last year. The tracking of gas prices by AAA show the price of a gallon of regular gas nationwide now at $4.99, after setting records in 31 of the last 32 days. So the June CPI report due next month is certain to show another big jump in gas prices.

And it’s not just energy driving prices higher. Food prices rose 10.1%, the first double-digit increase since 1981. The shelter index, which measures rents and other housing costs, posted a 5.5% increase, the biggest 12-month gain since 1991.

Used car prices, which had shown signs of moderating with monthly declines over the last three months, rose once again, lifting prices 16.1% over the last 12 months. New car prices are up 12.6% over the same period. A shortage of computer chips has curbed production at automakers, and that limited invented is responsible for the rise in prices.

Strong demand for air travel at the start of the summer travel season is also lifting airfares, which posted a one-month jump of 12.6% in May, the third straight month of a monthly rise of greater than a 10%. In the last 12 months, airfares are up 37.8% and fares in May are 21.7% higher than in May 2019, before the pandemic caused a near halt in demand for air travel.

The high pace of inflation means the Federal Reserve is all but certain to continue to aggressively raise interest rates when it meets next week.

Photo by Krzysztof Hepner on Unsplash

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