AMERICAN IDLE

3.5M still unemployed — despite 9M open jobs Inflation up most in 13 years

Inflation continued to swell in May, with consumer prices accelerating at the fastest pace in more than 12 years as the economy emerges from the pandemic, the feds said on Thursday.

The Labor Department’s Consumer Price Index, which measures a basket of goods and services, as well as energy and food costs, jumped 5 percent in May from a year earlier.

That’s higher than April’s 4.2 percent year-over-year rise in prices and the biggest 12-month rise since August 2008, just before the financial crisis sent the US into the worst recession it had seen since the Great Depression.

Economists surveyed by Dow Jones expected a 4.7 percent spike in May.

“Today’s data on consumer prices appears to be an extension of what we witnessed back in April, with the core consumer price index running hotter than expected,” Charlie Ripley, senior investment strategist for Allianz Investment Management, said.

“Within the data, strong contribution continues to come from sectors that are rebounding quickly with pandemic restrictions easing.”

Consumer prices rose 0.6 percent from the month prior on a seasonally adjusted basis, the Labor Department said.

The core consumer price index, which excludes volatile food and energy costs, rose 3.8 percent from a year ago, the fastest acceleration since 1992.

Used-car and -truck prices surged 7.3 percent, lower than the 10 percent gain of the month prior.

But that alone accounted for about one-third of the index’s gain. Food prices rose 0.4 percent, matching April’s increase. Energy prices were unchanged from April, driven by falling gas prices and an increase in the cost of natural gas and electricity.

One driver of the massive annual gain is very low inflation this time last year, when the pandemic gutted the economy and consumers were staying indoors and spending less. That could distort year-over-year comparisons as the economy reopens.

Those comparisons aside, prices are spiking throughout the economy for a variety of reasons. A global microchip shortage that’s hurt car manufacturing has sent the prices of used cars soaring.

Commodities from lumber to corn and other crops have risen dramatically, although some of those prices have begun to fall again in recent weeks. A labor shortage that’s preventing many businesses from fully reopening and meeting demand is also driving up some costs.

Many companies are now passing those costs on to consumers, sending the price for new houses, food and more upward.

For now, the surge in prices appears to reflect rapidly strengthening con

sumer demand as Americans venture out of their homes after a year of social distancing and pandemic-related restrictions.

Meanwhile, the increase in costs is also fueling a debate among economists over whether the inflation will be temporary this summer or be here to stay.

“As prices continue to rise by substantial amounts each month, the debate is going to intensify about whether all of these price increases are temporary or whether they are going to become entrenched,” said Chris Zaccarelli, chief investment officer for Independent Advisor Alliance. “It’s easy to see that a burst in consumer spending is a likely outcome as everyone tries to get back to their pre-pandemic lives, but it’s questionable that once people start paying higher prices and, as more people come back into the workforce, people begin getting paid higher wages, how any of those increases will ever be rolled back.”