Consumer prices broadly rose by more than forecast in May as rebounding demand butted heads with various supply shortages through reopening.
The consumer price index climbed by 0.6% from April to May, the Bureau of Labor Statistics said on Thursday. That landed above the median estimate of 0.4% from economists surveyed by Bloomberg. The release followed a 0.8% month-over-month jump in April, which was the largest single-month jump in prices since 2009.
The May increase came mostly from a 7.3% jump in the prices of used cars and trucks, accounting for about one-third of the seasonally adjusted all-items increase. Food costs jumped by 0.4%, and gasoline prices fell by 0.7%.
Prices surged by 5% from the year-ago period, indicating the strongest one-year inflation since August 2008. Forecasters had expected year-over-year price growth of 4.7%. The year-over-year measure is somewhat skewed by the May 2020 reading: Prices slid slightly that month as much of the country remained under strict lockdown measures. The decline makes for a lower level with which to compare last month's price growth.
Core CPI inflation — which strips out volatile food and energy prices to better track long-term changes — climbed by 0.7% month-over-month. That met the median estimate of a 0.7% increase.
Buying sprees, bottlenecks, and shortages
While measures of consumer demand have shown an economy well on its way to a full recovery, the rebound is running into a spate of supply strains. Shortages of products such as semiconductors and lumber have led prices to skyrocket. Meanwhile, Americans' spending has held at elevated levels, placing even more focus on the supply side to ease inflationary pressures.
The unprecedented economic situation has also split experts predicting how inflation will trend in the months ahead. Republicans and some moderate Democrats recently doubled down on their claims that the Biden administration's spending efforts risked an inflationary spiral.
Democrats largely see the overshoot as temporary and expect inflation to cool as supply chains heal. President Joe Biden on Tuesday took a larger step toward addressing various bottlenecks, announcing a plan to shore up the supply of semiconductors, batteries, and other in-demand products. The administration said it aimed to collaborate across departments to identify and counter bottlenecks as they emerge. The plan also proposed funding for boosting domestic production.
Even if supply chains quickly heal, the administration has indicated it's prepared for stronger inflation to last through the year. Elevated inflation rates are "not something that's endemic," Treasury Secretary Janet Yellen said late last month. The government should still spend on infrastructure and other investments despite the high inflation prints, she added.
