U.S inflation accelerated to a fresh 40-year high in May, a sign that price pressures are becoming entrenched in the economy.
The consumer price index, a wide-ranging measure of goods and services prices, increased even more than the 8.3% Dow Jones estimate. Excluding volatile food and energy prices, the so-called core CPI was up 6%, slightly higher than the 5.9% estimate.
On a monthly basis, headline CPI was up in the U.S by 1% while core rose 0.6%, compared with respective estimates of 0.7% and 0.5%.
Surging shelter, gasoline and food prices all contributed to the increase. Energy prices broadly rose 3.9% from a month ago, bringing the annual gain to 34.6%. Within the category, fuel oil posted a 16.9% monthly gain, pushing the 12-month surge to 106.7%.
Shelter costs, which account for about a one-third weighting in the CPI, rose 0.6% for the month, the fastest one-month gain since March 2004. The 5.5% 12-month gain is the most since February 1991.
Finally, food costs climbed another 1.2% in May, bringing the year-over-year gain to 10.1%.
Those escalating prices meant workers took another pay cut during the month. Real wages when accounting for inflation fell 0.6% in April, even though average hourly earnings rose 0.3%, according to a separate BLS release. On a 12-month basis, real average hourly earnings were down 3%.
Markets reacted negatively to the U.S inflation report, with stock futures indicating a sharply lower open on Wall Street and government bond yields rising.
“It’s hard to look at May’s inflation data and not be disappointed. We’re just not yet seeing any signs that we’re in the clear.” said Morning Consult’s chief economist, John Leer.
Some of the biggest increases came in airfares (up 12.6% on the month), used cars and trucks (1.8%), and dairy products (2.9%). The vehicle costs had been considered a bellwether of the inflation surge and had been falling for the past three months, so the increase is a potentially ominous sign, as used vehicle prices are now up 16.1% over the past year. New vehicle prices rose 1% in May.
These numbers dented hopes that inflation may have peaked and added to fears that the U.S. economy is nearing a recession.