Friday, 1 July, 2022
E-paper

Energy and food drive US inflation to highest for 40 years

Prices in the US rose faster than expected last month, as rising energy and food costs pushed inflation to the highest rate since 1981.

The annual inflation rate rose to 8.6% in May, the Labor Department said, after easing in April.

The rising cost of living has been squeezing households and putting pressure on policymakers to bring the issue under control.

The US central bank has been raising interest rates since March.

Analysts had hoped that the moves were starting to work to cool economic activity, easing the price pressures. But the conflict between Russia and Ukraine, which has driven up the price of oil and commodities like wheat as it disrupts exports from the two countries, has made tackling the problem more difficult.

Food prices were up more than 10% last month compared to May 2021, while energy surged more than 34%.

But Friday's report showed the increases continue to spread throughout the economy, pushing the cost of everything from airline tickets and clothing to medical services higher.

"So much for the idea that inflation has peaked. Consumer prices blew past expectations - and not in a good way with the 8.6% annual increase the fastest in more than 40 years," said Greg McBride, chief financial analyst at Bankrate.com.

"Worse the increases were nearly ubiquitous. Just no place to hide."

As the rising costs hit household purchasing power and prompt a pullback in spending, officials are warning that growth in many countries is at risk of a sharp downturn.

US stock markets fell in the wake of the inflation reports, with all three major indexes dropping more than 2%. The falls added to weeks of declines in US shares, as investors become nervous about the path for the economy.

For now, the US labour market has continued to add jobs, a sign that growth is continuing.