U.S. inflation hit a new 40 year high amid rising prices of gas, food

The prices of gas, food and most other goods and services jumped in May, raising inflation to a new four-decade high and giving American households no respite from rising costs.

The prices of gas, food and most other goods and services jumped in May, raising inflation to a new four-decade high and giving American households no respite from rising costs.

Consumer prices surged 8.6% last month from a year earlier, faster than April’s year-over-year increase of 8.3%, the Labor Department said Friday. The new inflation figure, the highest since 1981, will heighten pressure on the Federal Reserve to continue raising interest rates aggressively.

On a month-to-month basis, prices jumped 1% from April to May, much faster than the 0.3% increase from March to April. Contributing to that surge were much higher prices for everything from airline tickets to restaurant meals to new and used cars. Those price spikes also elevated so-called “core” inflation, a measure that excludes volatile food and energy prices. In May, core prices jumped a sharp 0.6% for a second straight month. They’re now 6% above where they were a year ago.

Friday’s report underscored fears that inflation is spreading well beyond energy and goods whose prices are being driven up by clogged supply chains and Russia’s invasion of Ukraine. It also sent stock prices tumbling. The increased pressure on the Fed to raises rates even faster– which means higher-cost loans for consumers and businesses– will raise the risk of a recession, too.

“Virtually every sector has higher-than-normal inflation,” said Ethan Harris, head of global economic research at Bank of America. “It’s made its way into every nook and cranny of the economy. That’s the thing that makes it concerning, because it means it’s likely to persist.”

Gas prices rose 4% just in May and have soared nearly 50% in one year. The national average price at the pump reached $4.99 Friday, according to AAA, edging closer to an inflation-adjusted record high of $5.40.

The cost of groceries surged nearly 12% last month from a year earlier, the biggest such increase since 1979. Rising prices for grain and fertilizer after Russia’s war against Ukraine, is intensifying that rise. Restaurant prices jumped 7.4% in the past year, the largest 12-month gain since 1981, reflecting higher costs for food and workers.

Employers face immense pressure to raise pay in a job market that remains robust, with low unemployment, few layoffs and near-record job openings. But while average wages are rising at their fastest pace in decades, they aren’t increasing fast enough for most workers to keep pace with inflation. Many households accumulated savings from government stimulus aid during the pandemic and are now having to draw on those savings to pay bills.