US consumer prices rose by 5% in May
US consumer prices rose by the most since 2008 during the month of May as concerns over inflation escalate.
Compared to the same month a year ago, consumer prices increased by 5% in May, according to the Bureau of Labor Statistics.
It is the most significant increase since August 2008, when prices rose by 5.4%, and is 0.8% higher than April’s price rise.
Pent-up demand in the US is facing up to a shortage of goods, from lumber and steel to chemicals and semiconductors, that are used in the manufacturing processes of key goods.
As consumers are increasingly venturing outside of their homes, services such as restaurants and hotels have also seen rising inflation.
The Bureau of Labor Statistics said in its report that when volatile goods, such as food and energy, were not accounted for, core CPI increased by 3.8% in May, compared to 3% the month before.
The Fed has said on a number of occasions that inflation levels were likely to be temporary.
This, and the fact the prices were subdued for some time, meant that the Fed took a more relaxed approach towards inflation.
Robert Alster, CIO at investment management firm Close Brothers Asset Management comments: “Inflation has been the measure to watch in recent months amid the deployment of Covid stimulus packages and the vaccine rollout. With prices rising, economists are left with a key question, what is driving the surge in inflation and, critically, is it transitory or persistent?“
“The reality is there are a number of factors at play ranging from oil prices to wage growth – all underpinned by a surge in demand. What is abundantly clear is that the Fed, and policy makers around the world, will be keeping a close eye on US inflation in the coming months to see whether this is a trend.”
“Regardless, we’re likely to hear more calls for action to deter rising inflation from the hawkish side of the administration. Whether these calls are heeded, and we see monetary policy levers being pulled, will depend on the next few months of data.”
