![]() The Federal Reserve responded to inflation the week of June 14 by pushing up its timeline on when it will next raise interest rates to 2023. The cost of food away from home also rose as more Americans spent more money on restaurants thanks not only to a third round of stimulus payments but also the lifting of dining restrictions and a recovering labor market. In addition to airline fares and hotels, the cost of apparel rose by more than 5.6 percent over the past year, driven in part by raw material shortages but also pent-up demand for clothes from shoppers coming out of quarantine. Rising consumer prices point to some positive signs that the economy is recovering. Drawing on the coma analogy, Sahm said we can’t predict whether the economy will suddenly “snap out of it” or awaken more slowly - but she believes inflation is likely to slow down in the coming months. “The minute they move out of that 12-month window, you’re going to start to see this surge in inflation.”Īnd while the recent inflation has been cause for worry among some in Washington, economist Claudia Sahm, a former section chief at the Federal Reserve, said it came as no surprise to economists after the historic deflation that occurred last year. ![]() “When the pandemic hit, we saw prices for some goods and services go down significantly,” he said. Robert Rich, director of the Center for Inflation Research at the Federal Reserve Bank of Cleveland, said some of these price hikes were not unexpected, given the historically low price drops that occurred across many sectors of the economy this time last year. Chart by Megan McGrew/PBS NewsHour.Īmid this sudden uptick in consumer demand and lingering supply chain issues tied to the pandemic, consumer prices rose 5 percent from the previous year in May. This is the highest since 2008, when inflation reached a peak of 5.6 percent, but nowhere near March 1980, when the inflation rate was 14.8 percent. Inflation, commonly measured by the Bureau of Labor Statistics’ Consumer Price Index, reached 5 percent in May. And as more consumers started purchasing goods and services that had gone largely untouched this time last year, the cost of items such as airline tickets, rental cars, and hotels rose significantly. This growing vaccination rate, coupled with falling cases, spurred many businesses that had shuttered, or scaled back during the height of the pandemic, to reopen and prompted people who had been largely homebound for the past year to go out and begin spending money again. The initial COVID-19 vaccine rollout was fairly successful, with more than 3 million Americans a day on average being vaccinated by mid-April 2021. goods – dropping by 0.4 percent in March 2020 and then by 0.8 percent in April, a monthly decline not seen since the Great Recession in 2008.īut the pandemic turned a swift corner in the U.S. ![]() the country experienced deflation, with the Consumer Price Index – a measure commonly used to measure changes in price level for U.S. In the first months after COVID-19 began spreading throughout the U.S. right now, and what they can - and can’t - tell us about the current state of the American economy. Here’s a look at some of the factors driving prices up in the U.S. “In modern history, we haven’t been in this situation where parts of the economy were essentially put into a coma for a while and now they’re waking up,” said Gabriel Ehrlich, an economist and forecaster at the University of Michigan. They also said they expected inflation to cool as most of these issues sort themselves out, provided the U.S. economy – more than any other area, including wages and unemployment.īut economists who spoke with the PBS NewsHour cautioned that the crisis spurred by the pandemic was unique, and the inflation rates recorded in April and May were intimately tied to the events of the last year, which saw unprecedented slowdowns in consumer spending, global supply chain issues that are still persisting, and deep job losses that have yet to rebound. In a recent survey, 26 percent of respondents said inflation was their number one concern regarding the U.S. Recent polling by the PBS NewsHour, NPR, and Marist suggest all of the talk surrounding inflation had an impact on how everyday Americans were feeling about it, too. ![]()
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