Annual inflation rate in the US jumped to 5% in May from 4.2% in previous month and above analysts expectations of 4.7%. This level of inflation has not been seen since August of 2008 and is accompanied by low base effects from last year when the pandemic hit the economy. Biggest price increases were recorded for gasoline (56.2%), used cars and trucks (29.7%), utility gas service (13.5%), transportation services (11.2%) and apparel (5.6%). Shelter costs increased 2.2% while food jumped 2.2%. The monthly rate edged down to 0.6% from 0.8%, mainly due to a 7.3% rise in cost of used cars and trucks.
US annual inflation rate jumped to 5% in May, while core inflation surged to 3.8%. Source: bls.gov
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Used cars and trucks and gasoline increased the most and without this inflation would be about 2% lower. However other categories like apparel, transport, housing and commodities also rose sharply. Source: bls.gov
As expected, used cars had the greatest impact on the rise in annual inflation, however by looking at other components one can notice that inflation is widening. Source: Twitter
In the near future, it will be worth following the housing/shelter sub-index. As one can see, with a strong economy, this category can easily add 0.5% more to inflation than is currently the case. Source: Twitter
Investors now will try to assess what today's figures would mean for the Fed policy. US central bank reassured several times that price pressures are transitory and that higher inflation could be tolerated for some time. Still, investors remain concerned that ongoing price pressure would eventually force Fed to start reducing its QE program early although a rate hike is not expected before 2023.
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