- Natalie Sherman
- Business and Finance Correspondent, New York
5 hours ago
Prices in the US rose faster than expected last month, as rising energy and food costs pushed inflation to its highest rate since 1981.
The Ministry of Labor said that the annual inflation rate rose to 8.6 percent last May, following declining in April.
The rising cost of living has also imposed heavy burdens on families and pressured policy makers to control the situation.
The US central bank has raised interest rates since March.
Experts hoped at the time that the move would improve economic activity and ease price pressures, but the Russian-Ukrainian conflict, which led to a rise in oil prices and commodities such as wheat, and disrupted the movement of exports between the two countries, made addressing the problem more difficult.
And food prices last month recorded an increase of more than 10 percent compared to May 2021, while energy prices recorded an increase of more than 34 percent.
However, a report released on Friday showed that prices continued to increase across the board, driving up the cost of everything from airline tickets and clothing to medical services.
“Inflation has peaked, and consumer prices have exceeded all previous expectations, in a not-so-good way with an annual increase of 8.6 percent, the fastest in more than 40 years,” said Greg McBride, chief financial analyst at Rhett Bank.
“What is worse is that prices are rising almost everywhere. There is no recourse than that,” he added.
The United States is doing its best in light of the high prices since last year, when the unexpectedly strong economic situation rebounded from the shock of the epidemic, driven by large doses of US government spending, including direct examinations of households, and increased supplies, which led to companies raising their prices. .
Now the war in Ukraine has exacerbated the problem around the world, as well as the effect of lockdown measures in China to limit the spread of Covid during the spring.
Given the impact of rising costs on household purchasing power and declining spending, officials warned that growth in several countries is at risk of sharp contraction.
“The war in Ukraine, lockdown measures in China, supply chain disruptions, and the risk of stagflation are detrimental to growth,” World Bank President David Malpass said earlier. “It will be difficult, for many countries, to avoid the risk of recession.”
The US stock markets had fallen in the wake of reports of inflation, and the three major indices fell by more than 2 percent, as well as the decline of US stocks for weeks, and investors became concerned regarding the economic path.
picture released, Archyde.com
The average price of a gallon of gasoline is close to $5
“Even if inflation peaks soon, it is not likely to slow down quickly, as higher prices might put pressure on consumer spending in the medium term,” said Richard Flynn, UK director of Charlo Schwab.
He added, “Add to this the ongoing supply chain problems and the economic impact due to Russia’s invasion of Ukraine and the impact on inflation, so it is normal to monitor the increase in fears of an economic downturn.”
The US labor market continues, at the present time, to add jobs, indicating continued growth.
But wages are not keeping pace with rising prices, as the rising cost of living has particularly affected low-income families, for whom food and energy make up a large part of their spending budget.
Opinion polls showed that the majority of Americans believe that inflation is the biggest problem facing the country, consumer morale has plummeted and the popularity of US President Joe Biden, who has been criticized by Republicans, has plummeted.
This month, prices rose by 1 percent, driven by the rise in the cost of gasoline, which set a new record in the United States, and the price of a gallon approached the average of $ 5.
US Treasury Secretary Janet Yellen told a hearing in Washington this week that lowering prices was a “highest priority”.
“We must do everything we can, and quickly, to bring prices down here in the United States,” Biden said in a statement.
Biden later pledged during a speech in Los Angeles, California, “I will do everything in my power to limit the high prices of Putin, and reduce the prices of oil and food.”
Roberto Burley, director of global policy research at Piper Sandler Investment Bank, said he expects prices to be in control as the US central bank, the Federal Reserve, raises interest rates, but cautioned that raising borrowing costs would hurt economic growth.
“The US economy is in good shape at the moment and we see that there is a strong demand for pretty much everything, for goods and services. But the Fed has to take care of this problem,” he said.
“We will not feel the result now, but in the quarters that precede the significant slowdown in the US economy, driven in large part by the Federal Reserve,” he added.
