Key Inflation Gauge Tracked by the Fed Remains a High 6.3%

June 30, 2022by Paul Wiseman, Associated Press Economics Writer
Key Inflation Gauge Tracked by the Fed Remains a High 6.3%
Gas is advertised for more than $6 per gallon at a gas station in Sacramento, Calif., Friday, May 27, 2022. (AP Photo/Rich Pedroncelli, File)

WASHINGTON (AP) — A measure of inflation that is closely tracked by the Federal Reserve jumped 6.3% in May from a year earlier, unchanged from its level in April.

Thursday’s report from the Commerce Department provided the latest evidence that painfully high inflation is pressuring American households and inflicting particular harm on low-income families and people of color.

The government’s report also said that consumer spending rose at a sluggish 0.2% rate from April to May. Consumer spending is beginning to weaken in the face of high inflation. But it’s still helping fuel inflation itself, especially as demand grows for services ranging from airline tickets and hotel rooms to restaurant meals and new and used autos.

On a month-to-month basis, prices rose 0.6% from April to May, up from the 0.2% increase from March to April.

Chronically high inflation has become a leading threat to the economy and a political hazard for President Joe Biden and Democrats as midterm elections near. Seventy-nine percent of U.S. adults describe the economy as poor, according to a new survey from The Associated Press-NORC Center for Public Affairs Research. Inflation is eclipsing the healthy 3.6% unemployment rate as a focal point for Americans who are struggling, in particular, with high gasoline and food prices.

In response, the Fed has embarked on a series of aggressive interest rate hikes that are intended to slow growth by making borrowing more expensive but that also risk causing a recession. Two weeks ago, the Fed raised its key rate by three-quarters of a point — its largest hike in nearly three decades — and signaled more large rate increases to come.

The Fed tends to monitor Thursday’s inflation gauge, called the personal consumption expenditures price index, even more closely it does the government’s better-known consumer price index. While the components of the two indexes differ — CPI tends to weigh gasoline and housing costs more heavily and to show higher inflation — the two gauges tell the same basic story: Inflation is running dangerously hot.

Thursday’s report showed that consumer incomes rose 0.5% from April to May, staying slightly ahead of inflation. In addition, the savings rate rose slightly to 5.4% last month, though it remains well below its peak of nearly 34% in April 2020. At that time, millions of Americans were banking government relief checks and otherwise saving money while staying at home as a precaution against COVID-19.

Soaring prices are a consequence of the economy’s unexpectedly swift rebound from the pandemic recession of 2020. Boosted by government stimulus checks, record-low borrowing rates and savings built up while stuck at home during the pandemic, consumers went on a spending spree that caught businesses off guard and overwhelmed factories, ports and freight yards. The resulting shortages of goods and labor sent prices spiking.

The Fed was slow to recognize the severity of the inflation threat, dismissing it as mainly a temporary consequence of supply chain bottlenecks. But spiking prices have proved intractable, and now the central bank is playing catch-up with sizable rate hikes that could end up derailing the economy.

High inflation has made consumers increasingly anxious about the economy. Prices have risen faster than their earnings and eroded their purchasing power. A measure of consumer confidence has reached its lowest point in 16 months, with Americans’ outlook darkened by inflation fears, especially gas and food prices.


A+
a-
  • Gas prices
  • inflation
  • interest rate
  • In The News

    Health

    Voting

    Economy

    September 26, 2023
    by Dan McCue
    Vilsack Warns Farmers, Children Will Feel Shutdown’s Effect Almost Immediately

    WASHINGTON — With a partial federal shutdown growing ever more likely come midnight Saturday, the Biden administration on Monday began... Read More

    WASHINGTON — With a partial federal shutdown growing ever more likely come midnight Saturday, the Biden administration on Monday began underscoring the consequences of Congress not quickly taking steps to avert it. At Monday afternoon’s press briefing at the White House, Agriculture Secretary Tom Vilsack painted... Read More

    Writers' Union Reaches Tentative Deal With Hollywood Studios

    LOS ANGELES (AP) — Screenwriters’ union leaders and Hollywood studios have reached a tentative agreement to end a historic strike after nearly... Read More

    LOS ANGELES (AP) — Screenwriters’ union leaders and Hollywood studios have reached a tentative agreement to end a historic strike after nearly five months, raising hopes that a crippling shutdown of film and television filming is near an end. Actors remain on strike, but movement on the writers' demands could... Read More

    September 20, 2023
    by Dan McCue
    Retailers Expect Record Year for Halloween Sales

    WASHINGTON — Total Halloween spending could reach a record $12.2 billion this year, significantly outpacing last year’s record $10.6 billion... Read More

    WASHINGTON — Total Halloween spending could reach a record $12.2 billion this year, significantly outpacing last year’s record $10.6 billion in sales, according to a survey conducted for the National Retail Federation. The annual market appraisal, which was performed on the federation’s behalf by Prosper Insights... Read More

    Governors From Arizona, New Mexico Seek Stronger Economic Ties With Taiwan

    SANTA FE, N.M. (AP) — Governors from the Southwestern United States are pursuing stronger business ties with Taiwan in hopes... Read More

    SANTA FE, N.M. (AP) — Governors from the Southwestern United States are pursuing stronger business ties with Taiwan in hopes of attracting new foreign investments and jobs to their landlocked states. Trade missions this week have taken New Mexico. Gov. Michelle Lujan Grisham and Arizona counterpart... Read More

    Low Mississippi River Limits Barges as Farmers Want to Move Crops Downriver

    DES MOINES, Iowa (AP) — A long stretch of hot, dry weather has left the Mississippi River so low that barge companies... Read More

    DES MOINES, Iowa (AP) — A long stretch of hot, dry weather has left the Mississippi River so low that barge companies are reducing their loads just as Midwest farmers are preparing to harvest crops and send tons of corn and soybeans downriver to the Gulf of Mexico.... Read More

    Workers Strike Three Detroit Automakers in Battle For a Bigger Share of Industry Profits

    DETROIT (AP) — About 13,000 U.S. auto workers stopped making vehicles and went on strike Friday after their leaders couldn’t... Read More

    DETROIT (AP) — About 13,000 U.S. auto workers stopped making vehicles and went on strike Friday after their leaders couldn’t bridge a giant gap between union demands in contract talks and what Detroit’s three automakers are willing to pay. Members of the United Auto Workers union began... Read More

    News From The Well
    scroll top