Image Source: Business Insider
Last month, prices in the United States grew faster than projected, as rising energy and food expenses drove inflation to its highest level since 1981. After dropping in April, the annual inflation rate climbed to 8.6% in May, according to the Labor Department.
Households have been squeezed by growing living costs, placing pressure on authorities to address the problem. Since March, the Federal Reserve of the United States has been hiking interest rates.
Analysts had hoped that the actions would begin to reduce economic activity and relieve price pressures. However, the conflict between Russia and Ukraine has exacerbated the problem by driving up the price of oil and other commodities like wheat by disrupting exports between the two countries.
Food costs increased by more than 10% last month compared to May 2021, while energy prices increased by more than 34%. However, according to Friday’s research, the price hikes are spreading throughout the economy, driving up the cost of everything from plane tickets to apparel to medical services.
Since last year, when an unexpectedly robust economic rebound from the pandemic’s shock – fueled by massive doses of US government spending, including direct cheques to households – swamped supplies, causing corporations to boost prices, the US has been battling with rising prices.
The conflict in Ukraine has now spread the problem throughout the world, with Covid-related shutdowns in China this spring playing a role.
Officials are warning that GDP in many nations is at risk of a dramatic decline as growing expenses hurt consumer purchasing power and cause a pullback in expenditure.
Following the inflation numbers, US stock markets plummeted, with all three major indices plunging more than 2%. The drops come on top of weeks of losses in US stocks as investors are increasingly concerned about the economy’s direction.
For the time being, the US labor market has continued to add employment, indicating that the economy is still growing. However, wages have not kept up with rising prices. The rising cost of living has disproportionately impacted lower-income households since basic necessities such as food and electricity account for a major amount of spending.
According to polls, the majority of Americans consider inflation to be the country’s most serious concern. However, as Republicans criticize US President Joe Biden over the problem, consumer sentiment has plummeted, and his approval ratings have tumbled.
Prices rose 1% month over month, owing to the growing cost of gasoline, which has reached new highs in the United States, reaching $5 per gallon on average.
During hearings this week in Washington, US Treasury Secretary Janet Yellen stated that lowering costs was her “number one goal.”
As America’s central bank, the Federal Reserve, raises interest rates, Roberto Perli, head of global policy research at Piper Sandler investment bank, expects prices to stabilize. However, he cautioned that increasing borrowing prices would stifle economic growth.
Opinions expressed by California Gazette contributors are their own.
