The reasons for the growing and sustained, at least for now, inflation rate are complex and debatable.
But there are a number of Biden administration policies that could be contributing to it, including massive government “stimulus” spending and wage increases caused by disincentives to work, like $300 weekly unemployment checks. Companies have to offer people more money to get them back in the labor force, and the cost is passed on to consumers. Similarly contributing to labor costs is the nationwide drive backed by Democrats for a $15 minimum wage.
Whether inflation will come down again or start to become a permanent feature, like it was in the 1970s before it was painfully driven out of the economy by Fed chief Paul Volker and his tight money policies, is anyone’s guess.
According to the Wall Street Journal:
U.S. consumer prices continued to climb strongly in May, surging 5% from a year ago to reach the highest annual inflation rate in nearly 13 years.
The Labor Department said May’s increase in consumer inflation was the largest since August 2008. The jump followed a 4.2% rise for the year ended in April. The core-price index, which excludes the often-volatile categories of food and energy, rose 3.8% in May from a year before—the largest increase for that reading since June 1992.
Prices for used cars and trucks leapt 7.3% from the previous month, driving one-third of the rise in the overall index. The indexes for furniture, airline fares and apparel also rose sharply in May.
The annual inflation measurements are being boosted by comparisons with figures from last year during Covid-19 lockdowns, when prices plummeted because of collapsing demand for many goods and services. This so-called base effect is expected to push up inflation readings significantly in May and June, dwindling into the fall.
Consumers are seeing many prices climb for numerous reasons as the U.S. economic recovery revs up.
Prices for new vehicles have soared because of a computer-chip shortage that has crimped car production. That, in turn, has bolstered prices for used autos. Rental-car prices have soared because companies sold their fleets when demand collapsed along with travel during the pandemic. Airfares and hotel-room rates are rebounding as consumers start traveling again.
More companies have started passing on to consumers the higher costs they are facing for raw materials and wages.