NATIONAL NEWS

Another Jump In Prices Tightens The Squeeze On US Consumers

Jun 10, 2021, 6:50 AM

Robin Graven-Milne, owner of Bike Plant, checks out Jeff Laughlin, who is picking up a repaired bik...

Robin Graven-Milne, owner of Bike Plant, checks out Jeff Laughlin, who is picking up a repaired bike, at the Bike Plant bike shop in the Bedford–Stuyvesant neighborhood of Brooklyn borough on June 07, 2021 in New York City. The availability of bicycles has declined as prices have increased in the U.S. due to inflation and a rise in demand since the start of the coronavirus (COVID-19) pandemic. According to research firm NPD Group, bike sales have increased by 77% in the past year with the average price paid for bicycles rising by 27%. (Photo by Michael M. Santiago/Getty Images)

(Photo by Michael M. Santiago/Getty Images)

WASHINGTON (AP) — American consumers absorbed another surge in prices in May — a 0.6% increase over April and 5% over the past year, the biggest 12-month inflation spike since 2008.

The May rise in consumer prices that the Labor Department reported Thursday reflected a range of goods and services now in growing demand as people increasingly shop, travel, dine out and attend entertainment events in a rapidly reopening economy.

The increased consumer appetite is bumping up against a shortage of components, from lumber and steel to chemicals and semiconductors, that supply such key products as autos and computer equipment, all of which has forced up prices. And as consumers increasingly venture away from home, demand has spread from manufactured goods to services — airline fares, for example, along with restaurant meals and hotel prices — raising inflation in those areas, too.

In its report Thursday, the government said that core inflation, which excludes volatile energy and food costs, rose 0.7% in May after an even bigger jump in April, and is up 3.8% over the past 12 months.

From the cereal maker General Mills to Chipotle Mexican Grill to the paint maker Sherwin-Williams, a range of companies have been raising prices or plan to do so, in some cases to make up for higher wages that they’re now paying to keep or attract workers.

The inflation pressures, which have been building for months, are not only squeezing consumers but also posing a risk to the economy’s recovery from the pandemic recession. One risk is that the Federal Reserve will eventually respond to intensifying inflation by raising interest rates too aggressively and derail the economic recovery.

The Fed, led by Chair Jerome Powell, has repeatedly expressed its belief that inflation will prove temporary as supply bottlenecks are unclogged and parts and goods flow normally again. But some economists have expressed concern that as the economic recovery accelerates, fueled by rising demand from consumers spending freely again, so will inflation.

The question is, for how long?

“The price spikes could be bigger and more prolonged because the pandemic has been so disruptive to supply chains,” Mark Zandi, chief economist at Moody’s Analytics, said in advance of Thursday’s inflation report.

But “by the fall or end of the year,” Zandi suggested, “prices will be coming back to earth.”

That would be none too soon for consumers like Carmela Romanello Schaden, a real estate agent in Rockville Centre, New York. Schaden said she’s having to pay more for a range of items at her hair salon. But she is feeling the most financial pain in the food aisle. Her monthly food bill, she said, is now $200 to $250 for herself and her 25-year-old son — up from $175 earlier in the year.

A package of strip steak that Schaden had normally bought for $28 to $32 jumped to $45. She noticed the increase right before Memorial Day but bought it anyway because it was for a family picnic. But she won’t buy it again at that price, she said, and is trading down to pork and chicken.

“I’ve always been selective,” Schaden said. “When something goes up, I will switch into something else.”

So far, Fed officials haven’t deviated from their view that higher inflation is a temporary consequence of the economy’s rapid reopening, with its accelerating consumer demand, and the lack of enough supplies and workers to keep pace with it. Eventually, they say, supply will rise to match demand.

Officials also note that year-over-year gauges of inflation now look especially large because they are being measured against the early months of the pandemic, when inflation tumbled as the economy all but shut down. In coming months, the year-over-year inflation figures will likely look smaller.

Still, last month, after the government reported that consumer prices had jumped 4.2% in the 12 months ending in April, Fed Vice Chair Richard Clarida acknowledged; “I was surprised. This number was well above what I and outside forecasters expected.”

And the month-to-month readings of inflation, which aren’t subject to distortions from the pandemic have also been rising since the year began.

Some economists say they fear that if prices accelerate too much and stay high too long, expectations of further price increases will take hold. That, in turn, could intensify demands for higher pay, potentially triggering the kind of wage-price spiral that bedeviled the economy in the 1970s.

“The market is starting to worry that the Fed may be going soft on inflation, and that could let the inflation genie out of the bottle,” said Sung Won Sohn, a professor of economics and finance at Loyola Marymount University in Los Angeles.

In April, the price of used cars and trucks jumped a record 10%. Hotel and motel prices also set a monthly record. Tickets for sporting events and home furniture surged, too, along with TVs, audio products and smart home devices. So did the cost of toys, games and playground equipment. Fares for Uber and Lyft are up, too.

Rising commodity costs are forcing Americans to pay more for items from meat to gasoline. Prices for corn, grain and soybeans are at their highest levels since 2012. The price of lumber to build homes is at an all-time high. More expensive commodities such as polyethylene and wood pulp have translated into higher consumer prices for toilet paper, diapers and most products sold in plastic containers.

General Mills has said it’s considering raises prices on its products because grain, sugar and other ingredients have become costlier. Hormel Foods has already increased prices for Skippy peanut butter. Coca-Cola has said it expects to raise prices to offset higher costs.

Kimberly-Clark, which makes Kleenex and Scott toilet paper, said it will be raising prices on about 60% of its products. Proctor & Gamble has said it will raise prices for its baby, feminine and adult care products.

This week, Chipotle Mexican Grill announced it was boosting menu prices by roughly 4% to cover the cost of raising its workers’ wages. In May, Chipotle had said that it would raise hourly wages for its restaurant workers to reach an average of $15 an hour by the end of June.

“There is stronger demand for hotel rooms, air travel, restaurant dining,” said Gus Faucher, chief economist at PNC Financial. “Many businesses are also facing upward pressure on their costs such as higher wages.”

Gregory Daco, chief U.S. economist at Oxford Economics, noted that in some cases, a jump in the price of goods such as autos is raising the price of car rental services.

“It is going to be a muggy summer on the inflation front,” Daco said. “There will be a pass-through from higher goods prices to higher prices for services.”

___

AP Business Writer Anne D’Innocenzio contributed to this report from New York.

KSL 5 TV Live

National News

Consumers hunting for Easter eggs and chocolate bunnies this year can expect sticker shock...

John Towfighi, CNN

As cocoa prices soar this Easter, chocolatiers consider alternatives

Consumers hunting for Easter eggs and chocolate bunnies this year can expect sticker shock.

2 hours ago

Post reading "Wall Street"...

Stan Choe, AP Business Writer

Stock market today: Wall Street rises to more records to close out its latest winning month

The stock market has been on a nearly unstoppable run since late October, and the S&P 500 just capped its fifth straight winning month.

3 hours ago

NEW YORK, NEW YORK - FEBRUARY 03: Larry David, comedian, writer, actor, and television producer loo...

Alli Rosenbloom, CNN

Don’t bother Larry David with menial pleasantries. He’s not interested

Just like the version of himself that he plays on “Curb Your Enthusiasm,” there are some things in life that Larry David can’t be bothered with.

3 hours ago

FILE - President Joe Biden, accompanied by first lady Jill Biden blows his whistle for the start of...

Darlene Superville, Associated Press

The White House expects about 40,000 participants at its ‘egg-ucation’-themed Easter egg roll

The White House says it's getting ready to welcome 40,000 people to its annual Easter Egg Roll.

3 hours ago

FILE: A Polestar electric car prepares to park at an EV charging station on July 28, 2023 in Corte ...

Alexa St. John, Matthew Daly and Joshua A. Bickel

Federal EV charging stations are key to Biden’s climate agenda, yet only 4 states have them

President Biden has set a goal of creating a national network of 500,000 publicly available chargers by 2030.

6 hours ago

A new draft law looks to prohibit the breeding of dogs with “skeletal anomalies,” such as dachs...

Nadine Schmidt, Claudia Otto and Frederik Pleitgen, CNN

Dachshunds under threat as Germany proposes ban on breeding

No more dachshunds? A new draft law looks to prohibit the breeding of dogs with “skeletal anomalies.”

8 hours ago

Sponsored Articles

Women hold card for scanning key card to access Photocopier Security system concept...

Les Olson

Why Printer Security Should Be Top of Mind for Your Business

Connected printers have vulnerable endpoints that are an easy target for cyber thieves. Protect your business with these tips.

Modern chandelier hanging from a white slanted ceiling with windows in the backgruond...

Lighting Design

Light Up Your Home With These Top Lighting Trends for 2024

Check out the latest lighting design trends for 2024 and tips on how you can incorporate them into your home.

Technician woman fixing hardware of desktop computer. Close up....

PC Laptops

Tips for Hassle-Free Computer Repairs

Experiencing a glitch in your computer can be frustrating, but with these tips you can have your computer repaired without the stress.

Close up of finger on keyboard button with number 11 logo...

PC Laptops

7 Reasons Why You Should Upgrade Your Laptop to Windows 11

Explore the benefits of upgrading to Windows 11 for a smoother, more secure, and feature-packed computing experience.

Stylish room interior with beautiful Christmas tree and decorative fireplace...

Lighting Design

Create a Festive Home with Our Easy-to-Follow Holiday Prep Guide

Get ready for festive celebrations! Discover expert tips to prepare your home for the holidays, creating a warm and welcoming atmosphere for unforgettable moments.

Battery low message on mobile device screen. Internet and technology concept...

PC Laptops

9 Tips to Get More Power Out of Your Laptop Battery

Get more power out of your laptop battery and help it last longer by implementing some of these tips from our guide.

Another Jump In Prices Tightens The Squeeze On US Consumers