WASHINGTON (AFP) – US inflation surged to a new four-decade high in May, defying hopes that price pressures had peaked and deepening President Joe Biden’s political troubles as Americans struggle to meet the cost of essentials like food and gas.
Government data released on Friday (June 10) put inflation at 8.6 per cent, extending increases not seen for a generation, with gas prices hitting daily records fuelled by Russia’s invasion of Ukraine and supply chain challenges related to the pandemic.
Biden, whose popularity has taken a hit as prices surge, has made fighting inflation his top domestic priority, but is finding he has few tools to directly impact prices.
Reacting to the latest inflation figure, he blamed “Putin’s Price Hike” for most of the increases, saying in a statement: “We must do more – and quickly – to get prices down here in the United States.”
The president has tried to hammer home his optimistic message about economic progress in the wake of the Covid-19 pandemic, including rapid GDP growth and record job creation, while pressing Congress to take action to lower costs on specific products.
He is due to speak later on Friday about inflation, and likely will repeat his call to approve legislation to go after firms such as shipping companies that are taking advantage of limited competition to impose steep price hikes.
But the new data dealt a crushing blow to his efforts, as the consumer price index (CPI) jumped 8.6 per cent compared to May 2021, up from 8.3 per cent in the 12 months ending in April and topping what most economists thought was the peak of 8.5 per cent in March.
Prices continued to rise last month for goods including housing, groceries, airline fares and used and new vehicles, setting new records in multiple categories, according to the Labor Department report.
“The headline inflation numbers are dreadful. Strip away some special factors & they’re merely bad,” Harvard economist and former White House adviser Jason Furman said on Twitter.
Some economists expected the easing of pandemic restrictions to cause a shift of US consumer demand towards services and away from goods, which they said would ease inflation pressures, but prices for services increased as well.
Soaring energy costs
CPI rose one per cent compared to April, after the modest 0.3 per cent gain in the prior month, the Labour Department reported, far higher than expected by analysts.
Energy has soared 34.6 per cent over the past year, the fastest since September 2005, while food jumped 10.1 per cent – the first increase of more than 10 per cent since March 1981, the report said.
Fuel oil more than doubled, jumping 106.7 per cent, the largest increase in the history of CPI, which dates to 1935.