SouthernWorldwide.com – Economists are anticipating that a significant inflation indicator, due for release on Wednesday, will reveal that U.S. consumer prices in May experienced their most substantial increase in over three years.
The Consumer Price Index (CPI) is projected to have climbed to an annual rate of 4.2% last month. This marks an increase from the 3.8% rate recorded in April, according to economists surveyed by the financial data firm FactSet. Should this projection hold true, it would represent the highest inflation rate since April 2023, when prices rose by 4.9% annually, as per government data.
Core CPI, a measure that strips out volatile food and energy prices, is expected to show a more moderate increase in May. It is forecast to have risen to an annual rate of 2.9%, up from 2.8% in the preceding month, according to FactSet’s findings.
Inflation saw a significant surge during the pandemic and continues to remain above the Federal Reserve’s target of 2% annual inflation. Unlike the supply chain disruptions that fueled inflation during the COVID-19 pandemic, the current uptick in prices is largely attributed to government policies, including the ongoing Iran war. This perspective was shared by Mark Zandi, chief economist at Moody’s Analytics, in a conversation with CBS News.
“It has been nearly five years since we last met the Fed’s target, and I believe this prolonged period has worn down the collective psyche. It’s one of the reasons people feel so disheartened about the economy,” Zandi commented.
A recent CBS News poll indicated that three-quarters of Americans feel their incomes are not keeping pace with the rising cost of inflation.
The May CPI data is likely to highlight that escalating energy prices are the primary driver behind the persistent inflation. These figures will reflect the increase in fuel costs observed between mid-April and mid-May.
More recently, however, oil and fuel costs have begun to decrease, as indicated by CBS News’ energy price tracker. The average price for a gallon of gasoline in the U.S. currently stands at $4.16, which is 40 cents lower than its recent peak on May 21, according to AAA. Brent crude, the global oil benchmark, saw a decline of 3.5% on Tuesday, settling at $90.99 per barrel. West Texas Intermediate, the U.S. benchmark, also fell by 4.1% to $87.57 per barrel.
In addition to the insights the latest CPI report will provide on energy costs, economists will also closely examine the prices of goods and services. This analysis will help assess the ripple effects of higher fuel prices throughout the economy, as explained by Zandi.
“It’s not solely about gasoline prices; diesel prices are also contributing, which increases the cost of transporting everything that moves on trucks, from groceries to packages ordered online,” Zandi stated. “The cost of air travel has also risen as airlines pass on the increased expenses of jet fuel to consumers.”
