Consumer prices surged higher in May.
The Consumer Price Index rose five percent compared with a year ago, the Department of Labor said Thursday. On a monthly basis, the CPI rose a hotter than expected 0.6 percent.
Economists had expected the Labor Department to report that consumer prices rose 0.5 percent in May compared with April. The consensus forecast was for a 4.7 percent gain when measured against May of 2020, which would have been the hottest reading since skyrocketing energy prices pushed up the index in the fall of 2008.
The reading for core inflation, which strips out volatile food and energy prices, was expected to rise 3.5 percent compared with a year ago. That would have been the strongest annual increase in 28 years. On a monthly basis, economists were expecting a 0.5 percent gain.
In Thursday’s release, the government said core inflation rose 0.7 percent. On an annual basis, core inflation jumped 3.8 percent. This was the hottest reading since June 1992.
The index for used cars and trucks continued to rise sharply, jumping 7.3 percent in May. Compared with a year ago, used car prices are up 29.7 percent.
Energy prices were flat, with a drop in gasoline prices offsetting increases in electricity and natural gas. Food prices rose 0.4 percent. The index for airfares rose 7 percent compared with April and is up 24.1 percent compared with a year ago.
Federal Reserve officials and Treasury Secretary Janet Yellen have said they expect this rapid rise in the cost of living to taper off later this year. The year-over-year numbers are boosted by what economists call a base effect, which simply means that the figures are based on gains over prices that were depressed by pandemic shutdowns. In a few months, however, the comparison will be against less depressed prices as the economy began to recover.
Increasingly, however, some analysts fear that inflation could go on for longer and become hotter than expected because of the combination of very low interest rates, pent up consumer demand for goods and services, a particularly large budget deficit, and the release of excess savings built up by stimulus payments.