WASHINGTON – American consumers absorbed another surge in prices in May – a 0.6% increase from April and 5% during the last year, the biggest 12-month inflation spike since 2008.
The May rise in consumer prices that the Labor Department reported Thursday reflected a range of goods and services now in growing demand as people increasingly shop, travel, dine out and attend entertainment events in a rapidly reopening economy.
The increased consumer appetite is bumping up against a shortage of components that supply such key products as autos and computer equipment, all of which has forced up prices.
And as consumers increasingly venture away from home, demand has spread from manufactured goods to services, raising inflation in those areas, too.
In its report Thursday, the government said that core inflation, which excludes volatile energy and food costs, rose 0.7% in May after an even bigger 0.9% increase in April, and has risen 3.8% during the last year. That is the sharpest 12-month jump in core inflation since 1992. And it is far above the Federal Reserve's 2% target for annual price increases.
Among specific items in May, prices for used vehicles, which had surged by a record 10% in April, shot up an additional 7.3% and accounted for one-third of May's overall price jump. The price of new cars, too, rose 1.6% – the largest one-month increase since 2009.
The jump in new and used vehicle prices reflects supply chain problems that have caused a shortage of semiconductors. The lack of computer chips has limited production of new cars, which, in turn, has reduced the supply of used cars. As demand for vehicles has risen, prices have followed.
But higher prices were evident in a wide variety of categories in May, including household furnishings, which rose 0.9%, driven by a record jump in the price of floor coverings. Airline fares rose 7% after having increased 10.2% in April.