U.S. inflation has again risen to new heights, as recent reports from the U.S. Bureau of Labor Statistics (BLS) indicate that its consumer price index (CPI) climbed in May.
The agency released its CPI summary on Friday morning, showing that inflation climbed to 8.6% last month—up 0.3% from April—marking the largest 12-month increase since December 1981.
Core inflation—excluding food and energy—rose to 6% in May.
The Department of Labor attributed the increase in inflation primarily to the shelter, gasoline and food indexes which climbed last month.
After declining in April, the energy index rose 3.9% over the month—and 34.6% over the past 12 months. That was heavily driven by the surge in gasoline prices last month, which climbed 4.1%. Initial Wall Street Journal reports on the CPI index noted that the ongoing geopolitical conflict between Russia and Ukraine contributed heavily to price growth in energy.
Gasoline prices have continued to climb nationwide, with the average gallon of regular unleaded currently going for $4.98, based on AAA data. The BLS report also notes that the index for fuel oil more than doubled, rising 106.7% annually, representing the largest increase in the series’ history, which dates to 1935.
The shelter index increased 0.6% in May—the largest monthly increase since March 2004—while also tallying a 5.5% increase annually.
The food index rose 1.2% in May, following a 0.9% increase in April. The index also saw an 11.9% increase year-over-year, marking the largest uptick since April 1979.
Aside from the ripple effects of geopolitical tensions, real estate and lending industry experts have argued that upward inflation pressures are also influenced—at least in part—by the tight U.S. labor market, with demand for workers outstripping supply.
U.S. Employers added 390,000 jobs last month, exceeding expectations and dropping the national unemployment rate to a near half-century low. Despite the progress, fewer Americans are employed as a share of the population than before the pandemic.
Experts at the National Association of REALTORS® (NAR) weighed in on the current CPI levels, stating that inflation is hurting everyone, especially those who need to drive more frequently like agents.
“Gasoline now costs 49% more than it did a year ago and 130% more than two years ago. Airfare and hotel room rates have risen 38% and 22%, respectively, year-over-year, thereby putting a dent in summer travel plans for some Americans,” says NAR Chief Economist Lawrence Yun in a statement. “Electric car drivers are feeling less pain, comparatively, with electricity prices up by 12% annually. Food prices are 10% higher than last year, quickly offsetting wage increases and the 5.9% gain in Social Security checks.
Yun also pointed at the ongoing rent increases.
“Rising rents and home prices (not part of CPI inflation) have caught up with multiple years of housing underproduction of single-family homes and apartments,” he says. “High inflation means many more interest rate hikes by the Fed.”
“The mortgage market may have already priced this in, so most of the increases in mortgage rates may have already occurred with only small changes in the upcoming months,” Yun adds.
The report comes during ongoing efforts to tighten monetary policy by the Federal Reserve, which announced another interest rate hike of 50 basis points following its May meeting. Fed officials are gearing up for their June meeting and are faced with the continued challenge of trying to reel in elevated inflation without sending the economy into another recession.