US inflation rate jumps to 5%, highest since 2008 – business live


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[8]

Andrew Hunter[9], senior US economist at Capital Economics says America’s surging inflation is starting to look a little less transitory.

Hunter writes[10]:


The further jump in core CPI inflation to a 28-year high of 3.8% in May, from 3.0%, was again driven by the same handful of categories most directly affect by the lifting of virus restrictions. But there were also signs of emerging inflationary pressures in other sectors, including housing costs and restaurant prices, which suggests that not all the current upward pressure on inflation will prove transitory.

He points out that certain sectors directly affected by the pandemic were responsible for a ‘good part’ of the 0.6% monthly increase in the headline CPI – including used vehicles (+7.3% m/m), car rentals (+12.1%), airfares (+7.0%) and, to a lesser extent, hotel room rates (+0.4%). But other costs rose too — including the cost of dining out (up 0.6% month-on-month, and 4% higher than a year ago).

Hunter says:


The 0.6% rise in food away from home prices suggests that the labour shortages (and resulting upward pressure on wages) in the leisure & hospitality sector are feeding through.

[11]

The big question for central bankers at the Fed is whether the jump in US inflation is transitory, or a sign that prices rises are stickier.

If it’s a temporary impact, due to the impact of the pandemic, then they’re more likely to ‘look through’ it rather than tighten monetary policy (by slowing their stimulus programs).

Frances Donald, global chief economist & head of macro strategy at Manulife Investment Management, points out that the return to more normal prices will not be smooth:

Frances Donald (@francesdonald)

Within US inflation data, those areas that were producing DOWNSIDEs on inflation over COVID(lodging, airline fares, apparel) are now unwinding but those areas that produced UPSIDE during COVID (used cars, household stuff) have yet to unwind – they will but it’s not smooth pic.twitter.com/GABuUePh1y[12]

June 10, 2021[13]

Frances Donald (@francesdonald)

Importantly, the “inflation” we’re seeing in things like airline tickets or apparel is mean-reversion to the price levels that existed pre-covid.

We’ll likely see mean-reversion to the downside on items like household furnishings and used cars. Watch the LEVELS as well as m/m% pic.twitter.com/FQgOyd0hbR[14]

June 10, 2021[15]

[16]

Heather Long of the Washington Post has highlighted some of major price changes over the last 12 months:

Heather Long (@byHeatherLong)

What costs more now?
It’s murky to compare to May 2020, but people still feel these increases. Car rental 110% (y/y)
Gas 56%
Used cars 30%
Laundry appliances 27%
Airfares 24%
Auto insurance 17%
Moving 16%
Bacon 13%
Bikes 10%
Hotels 10%
Furniture 9%
Whole milk 7.2%
Clothes 6%

June 10, 2021[17]

[18]

Household furnishings, new vehicles, airline fares and clothing prices all rose last month.

The US CPI report shows that:

  • The household furnishings and operations index increased 1.3% in May, its largest monthly increase since January 1976.
  • The index for new vehicles rose 1.6% in May, its largest 1-month increase since October 2009.
  • The index for airline fares continued to increase, rising 7.0% in May after increasing 10.2 percent the prior month.
  • The apparel index also rose in May, increasing 1.2 percent.

[19]

Used car and truck prices remained hot in May — rising by 7.3% during the month, following a 10% jump in April.

That accounted for about one-third of the increase in the CPI last month, the inflation report shows.

Tony Le (@TonyLe73)

Used cars account for 1/3 of overall CPI increase…WOW pic.twitter.com/fUYdBb2K7C[20]

June 10, 2021[21]

Over the last year, the used cars and trucks index has jumped by 29.7%.

Several factors seem to be driving this move.

On the supply side, production of new cars has been hit by the global shortage of semiconductors, so people are looking for second-hand autos instead. Plus, the number of customers defaulting on vehicle finance and had their car repossessed fell during the pandemic,[22] meaning less supply for dealers.

Demand is strong, due to stimulus checks and the involuntary saving that took place in the pandemic. Plus, and a move away from public transport as Americans try to cut their risk of catching Covid-19.

[23]

US energy prices were 28.5% higher than a year ago, the inflation report shows, helping to push the headline rate of CPI up to 5%.[24]

That includes a 56% rise in gasoline prices compared with May 2020, when demand slumped due to pandemic.

But in May alone, the energy index was unchanged “with a decline in the gasoline index again offsetting increases in the electricity and natural gas indexes”. The BLS’s food index increased 2.2% year-on-year, with food prices rising by 0.4% during May, as they also did in April.

[25]

Sarah Foster (@sarahffoster)

NEWS: Consumer prices rose faster than expected in May. – Headline CPI rose 5% from a year ago, versus 4.7% expected and the largest annual burst since 2008

– Core CPI rose 3.8% year-over-year, versus 3.5% expected and the fastest pace since 1992https://t.co/cmUMVVS35b pic.twitter.com/wZMiPw9nZI[26][27]

June 10, 2021[28]

[29]

Biggest jump in core inflation since 1992

At 3.8% year-on-year in May, core inflation across the US economy has risen at the fastest annual rate since June 1992 (that’s excluding food and energy).

Steven Rattner (@SteveRattner)

The core CPI jumped again in May, by 3.8% year-over-year, more than the expected 3.5%. By this measure, inflation looks to be accelerating. pic.twitter.com/3Yh5cgi1kS[30]

June 10, 2021[31]

Steven Rattner (@SteveRattner)

But looking at price levels (not %s), this could be seen as catching up after sluggish price increases during pandemic. My view: Inflation is accelerating and we should be trimming stimulus. pic.twitter.com/v7G5t9PkPz[32]

June 10, 2021[33]

Holger Zschaepitz (@Schuldensuehner)

Gain in US CPI exceeds forecasts, Fuels inflation concern.

U.S. consumer price index rose 5% YoY, vs.

4.7% estimate. Rose 0.6% MoM vs 0.5% expected. Core CPI rose 3.8% most since 1992! pic.twitter.com/sJFnSg1aQb[34]

June 10, 2021[35]

Updated at 1.53pm BST

[36]

Joe Weisenthal (@TheStalwart)

HOT:

CPI (YOY) rises 5.0% vs.

4.7% expected. Core CPI (YOY) up 3.8% vs.

3.5% expected. S&P futures slipping a little on the news https://t.co/GCpQ3slHLX pic.twitter.com/PGZ6d2jOOE[37][38]

June 10, 2021[39]

[40]

US inflation jumps to 5%

Newflash: US inflation rose to 5% year-on-year in May, the highest since 2008.

That’s a bigger jump than expected, up from 4.2% in April, and will fuel concerns that inflationary pressures are building in America as the economy rebounds strongly from the pandemic.

Core inflation, which strips out volatile items like food and energy, jumped to 3.8% year-on-year.

Julianna Tatelbaum (@CNBCJulianna)

BREAKING: US CPI +5% YoY, ex-food/energy +3.8%

Boom. #inflation[41]

June 10, 2021[42]

On a monthly basis, the CPI rose by 0.6% in May compared with April, while core inflation rose by 0.7% month-on-month.

Andreas Lipkow (@AndreasLipkow)

*US May Consumer Prices +0.6%; Consensus +0.5% *US May CPI Ex-Food & Energy +0.7%; Consensus +0.5% *US May Consumer Prices Increase 5% From Year Earlier; Core CPI Up 3.8% Over Year#trading #news #stocks #usa #inflation #cpi[43][44][45][46][47][48]

June 10, 2021[49]

Joseph Trevisani (@JosephTrevisani)

US May inflation 5%, 3.8% core highest in a generation

June 10, 2021[50]

Chris Giles (@ChrisGiles_)

5% US CPI inflation (expected 4.5%)

Oof pic.twitter.com/BCVPlXmwJU[51]

June 10, 2021[52]

Updated at 1.39pm BST

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References

  1. ^ 1.49pm BST 13:49 Biggest jump in core inflation since 1992 (www.theguardian.com)
  2. ^ 1.38pm BST 13:38 US inflation jumps to 5% (www.theguardian.com)
  3. ^ 1.20pm BST 13:20 ECB maintains faster bond-buying: snap reaction (www.theguardian.com)
  4. ^ 1.07pm BST 13:07 ECB presses on with ‘significantly faster’ bond-buying plan (www.theguardian.com)
  5. ^ 12.53pm BST 12:53 European Central Bank leaves interest rates on hold (www.theguardian.com)
  6. ^ 11.58am BST 11:58 Bank regulators call for toughest capital rules for bitcoin (www.theguardian.com)
  7. ^ 10.43am BST 10:43 UK furlough total hits new low (www.theguardian.com)
  8. ^ (www.theguardian.com)
  9. ^ Andrew Hunter (www.capitaleconomics.com)
  10. ^ writes (www.capitaleconomics.com)
  11. ^ (www.theguardian.com)
  12. ^ pic.twitter.com/GABuUePh1y (t.co)
  13. ^ June 10, 2021 (twitter.com)
  14. ^ pic.twitter.com/FQgOyd0hbR (t.co)
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  20. ^ pic.twitter.com/fUYdBb2K7C (t.co)
  21. ^ June 10, 2021 (twitter.com)
  22. ^ fell during the pandemic, (www.federalreserve.gov)
  23. ^ (www.theguardian.com)
  24. ^ the headline rate of CPI up to 5%. (www.theguardian.com)
  25. ^ (www.theguardian.com)
  26. ^ https://t.co/cmUMVVS35b (t.co)
  27. ^ pic.twitter.com/wZMiPw9nZI (t.co)
  28. ^ June 10, 2021 (twitter.com)
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  30. ^ pic.twitter.com/3Yh5cgi1kS (t.co)
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  41. ^ #inflation (twitter.com)
  42. ^ June 10, 2021 (twitter.com)
  43. ^ #trading (twitter.com)
  44. ^ #news (twitter.com)
  45. ^ #stocks (twitter.com)
  46. ^ #usa (twitter.com)
  47. ^ #inflation (twitter.com)
  48. ^ #cpi (twitter.com)
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