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Record inflation of +8.6% in May’22 challenging Consumers and Policy Makers

A new 40-year inflation growth record of +8.6% vs last year was set this May with ongoing price increases for gas, shelter, groceries, cars, and other essentials. This is now hitting Americans harder and causing challenges for policy makers to reign in without causing a recession.

Americans are feeling increasing strain on their wallets: a gallon of gas is now around $5 nationally (up +49% vs May 2021), utility gas is up +30%, Meat, poultry, fish, and eggs up +12% and cars continue to be higher priced — Used-vehicle +16% and new +13% vs last year. With no clear end in sight consumers are planning to adjust what they buy and when.

The inflationary trend over the last many months is driven by a mix of:

  • positives: high consumer demand (people have saved and want to spend) along with a strong job market, but also

  • challenges: in supply with supply chain backlogs, Chinese COVID lockdowns and the Ukraine war (straining energy and food supplies).

While the Federal reserve is raising interest rates to reduce inflation —planning 7 hikes by end of the year — this is driving anxiety for stock and bond markets, with Dow industrials dropping 880 points yesterday (6/10/22) when the CPI data was released and was higher than economists expected. (Most thought inflation peaked a few months ago, as April’s was a little lower than the March record).

The Washington Post’s Jun 10’22 article has interesting data on components of inflation over the last many months, noting “The run-up in gas prices has become one of the most visceral ways people feel inflation in their daily lives.”

The Wall Street Journal reported Jun 10’22: “"We suspect that the formidable momentum in inflation could push the headline rate for CPI close to 9% as early as next month,” said Sarah House, senior economist at Wells Fargo Securities, adding that it is likely to stay near those levels through the autumn."

The May inflation figures came as consumer sentiment soured further on the economy. The preliminary estimate published Jun 10'22, by the University of Michigan found:

Consumer sentiment index fell to 50.2 in June from 58.4 in May, marking its lowest reading on record.

Nearly half of those surveyed attributed their negative views to inflation, up from 38% the prior month, and long-term inflation expectations rose to the highest level since 2008.”

Rocky times continue.

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