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United States inflation hits new 40-year high of 8.6% for May

WASHINGTON – The cost of gas, food and other necessities skyrocketed in May, pushing inflation to a new four-decade high and not giving American households a break from rising costs.

Consumer prices rose 8.6% last month from 12 months earlier, up from 8.3% year-on-year in April, the Labor Ministry said on Friday.

On a monthly basis, prices rose 1% from April to May, a sharp rise from a 0.3% increase from March to April. Much higher gas prices were responsible for most of this increase.

America’s rampant inflation is putting severe pressure 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. Low-income and black and Hispanic Americans, in particular, struggle because, on average, most of their income is consumed by necessities.

At the same time, inflation has shown some signs of easing and economists expect it to decline this year, though not much. Some analysts have predicted that the government’s inflation index on Friday – the consumer price index – could fall below 7% by the end of the year. In March, the CPI on an annual basis reached 8.5%, the highest such rate since 1982.

High inflation has also forced the Federal Reserve to move to what is likely to be the fastest growing interest rate rise in three decades. By sharply raising borrowing costs, the Fed hopes to cut spending and growth enough to curb inflation without leading the economy into recession. For the central bank, it will be a difficult balancing act.

Surveys show that Americans see high inflation as the country’s top problem, and most disapprove of President Joe Biden handling the economy. Congressional Republicans are pounding Democrats on the issue in the run-up to midterm elections this fall.

THIS IS AN INFORMATION UPDATE. The previous AP story follows.

WASHINGTON (AP) – The cost of gas, food and other necessities probably rose in May, giving Americans no respite from the worst inflation outbreak in four decades.

Economists have forecast that overall consumer prices rose 8.2% last month from a year earlier, according to data provider FactSet. This would be slightly lower than the 8.3% year-on-year increase in April and the 8.5% increase in March, which was the largest since 1982.

And on a monthly basis, prices are expected to have jumped 0.7% from April to May, sharply from a 0.3% increase from March to April. The acceleration would almost certainly be due to gas prices, which had fallen in April but jumped more than 10% in May alone and have since averaged nearly $ 5 a gallon nationwide.

America’s rampant inflation is putting severe financial pressure on families, forcing them to pay much more for items such as food, gas and rent, and reducing their ability to afford discretionary items, from haircuts to entertainment. Low-income and black and Hispanic Americans, in particular, struggle because, on average, most of their income is consumed by necessities.

High inflation has also forced the Federal Reserve to move to what is likely to be the fastest growing interest rate rise in three decades. By sharply raising borrowing costs, the Fed hopes to cut spending and growth enough to curb inflation without leading the economy into recession. For the Fed, it will be a difficult balancing act.

Surveys show that Americans view high inflation as the nation’s top problem, and a significant majority disapprove of President Joe Biden handling the economy. Congressional Republicans are pounding Democrats over the issue in the run-up to the midterm elections.

Inflation remained high even as the sources of rising prices shifted. Initially, strong demand for goods from Americans stuck in the house for months after the COVID strike caused supply chain shortages and grunts and pushed up prices for cars, furniture and appliances.

Now, as Americans continue to spend on services such as travel, entertainment and dining out, the cost of airfare, hotel rooms and restaurant meals has skyrocketed. Russia’s invasion of Ukraine has further accelerated oil and gas prices. And with China loosening tight COVID lockdowns in Shanghai and elsewhere, more people are leading the way, raising oil prices even further.

However, Friday’s report on consumer inflation may contain some encouraging signs. Economists expect “core” inflation – which rules out volatile food and energy prices – to slow. On an annual basis, economists estimated that core prices rose 5.9% in May from 6.2% year-on-year in April. It would be the second consecutive month that this percentage is declining. Economists are closely monitoring the core of inflation because it is considered a better measure of future price changes.

The cost of used cars, which skyrocketed in 2020 and 2021 as shortages of semiconductors sharply reduced the availability of new cars, has been falling for three consecutive months. And the cost of clothes and appliances fell in April.

Commodity prices are expected to fall further in the coming months. Many major retailers, including Target, Walmart and Macy’s, have reported that they are now stuck with too many of the patio furniture, electronics and other products they ordered when these items were in high demand and should be discounted.

Even so, rising gas prices are eroding the economies of millions of Americans. Pump prices average around $ 5 a gallon nationwide and are close to the adjusted inflation-adjusted record of about $ 5.40 achieved in 2008.

Research by the Bank of America Institute, which uses anonymous data from millions of their customers ‘credit and debit card accounts, shows that gas spending consumes a larger share of consumers’ budgets and overshadows their ability to buy other items.

For lower-income households – defined as those with incomes below $ 50,000 – gas spending reached almost 10% of all credit and debit card spending in the last week of May, the institute said in a report this week. . This is up from about 7.5% in February, a sharp increase in such a short time.

All of the bank’s customers’ spending on durable goods such as furniture, electronics and home improvement has fallen over the past year, according to the institute. But their spending on airfare, hotels and entertainment continued to rise.

Economists have cited this shift in spending from goods to services as a trend that is expected to help reduce inflation by the end of the year. But with wages steadily rising for many workers, prices are rising for services.

Copyright © 2022 by the Associated Press. All rights reserved.

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United States inflation hits new 40-year high of 8.6% for May Source link United States inflation hits new 40-year high of 8.6% for May

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