U.S. consumer prices likely continued to rise rapidly in May as the economic recovery picked up, reflecting a surge in demand along with shortages of labor and materials.
Economists surveyed by The Wall Street Journal estimate that the Labor Department will report that the consumer-price index increased by 4.7% in May from a year earlier, up from 4.2% for the year ended in April. That would be the highest 12-month inflation rate since 2008. The core-price index, which excludes the often-volatile categories of food and energy, likely rose 3.5% in May from a year before, they estimated.
They also projected that the index rose a seasonally adjusted 0.5% in May from April. The index measures what consumers pay for goods and services, including clothes, groceries, restaurant meals, recreational activities and vehicles.
The annual inflation measurements are being boosted by comparisons with figures from last year during Covid-19 lockdowns, when prices plummeted because of collapsing demand for many goods and services. This so-called base effect is expected to push up inflation readings significantly in May and June, dwindling into the fall.
Compared with two years ago, overall prices rose a more muted 2.2% in April. Overall prices, however, jumped at a 7.2% annualized rate in the three months ended in April.
Consumers are seeing many prices climb for numerous reasons as the U.S. economic recovery revs up.
Prices for new vehicles have soared because of a computer-chip shortage that has crimped car production. That, in turn, has bolstered prices for used autos. Rental-car prices have soared because companies sold their fleets when demand collapsed along with travel during the pandemic. Airfares and hotel-room rates are rebounding as consumers start traveling again.
More companies have started passing on to consumers the higher costs they are facing for raw materials and wages.
Food makers said their costs are climbing at an alarming rate, prompting them to raise some prices. “The inflation pressure we’re seeing is significant,”
General Mills Inc.
said at a recent investor conference. “It’s probably higher than we’ve seen in the last decade.”
He and his peers point to transportation, commodity and labor costs all increasing at the same time. They expect the trend to continue for at least the rest of this year. As a result, General Mills,
Campbell Soup Co.