Inflation is heating up across the economy as the ebbing of the pandemic unleashes pent-up consumer demand at a time of supply shortages. Overall consumer prices jumped 5% in May from a year earlier—the biggest increase since 2008, the Labor Department reported Thursday.
Some of these increases—such as for airfares, restaurants and women’s suits—reflect a return to normal, or pre-pandemic price levels, after prices collapsed last year due to business closures and restrictions and consumers’ fear of traveling and getting infected. Some—such as car and truck prices—are due to shortages of specific components or materials. Such jumps are likely to prove temporary and unlikely to lead to persistent increases for years to come.
Other price rises, however, could reflect more lasting changes in workers’ and consumers’ behavior over the past year. Here are some examples of May price increases hitting consumer pocketbooks directly:
Returning to Normal
Restaurants: Prices for meals at full-service establishments rose 0.6% in May from the month before, and were up 4% from a year earlier. Meanwhile, grocery prices are rising more slowly this year than during 2020, when people shifted to eating more at home.
Price pressures may continue to build in coming months as people venture out more. The average number of seated diners tracked on the restaurant reservation platform OpenTable was down in the first week of June just 9% from 2019 levels. That is better than the figures for the first week of May, when they were down 21% from two years earlier.
Travel: Americans’ yen for travel after spending a year cooped up is another big cause of the pickup in overall prices. The volume of travelers passing through TSA airport checkpoints has recovered to nearly 75% of 2019 levels, versus about 40% at the beginning of the year. The rush to return to the skies drove airfares up 24.1% in May from a year before, while hotel and motel prices rose by 9% over the same period, the most on record.
While these increases are dramatic, they are not necessarily a sign of lasting price pressures. Prices for both services plummeted during the pandemic thanks to lockdowns, travel restrictions, telecommuting and fear of the virus. Airfares are still down 12% from February 2020 levels, while prices for hotels and motels are off by 4.6%.
Apparel: Prices for women’s suits and dresses plummeted last year as the pandemic canceled social events and people shifted to working from home. In May, however, those prices rose from a year earlier for the first time since the Covid-19 crisis began, as more women left the house. The decline in prices for men’s suits slowed sharply last month as well.
Vehicles: One-third of the monthly increase in CPI in May came from a jump in prices for used cars and trucks. A global shortage in semiconductor chips exacerbated by the pandemic has held back production, leaving dealership inventories lean. That shortage in new cars has tightened the supply of used cars as owners hold on to their vehicles longer—which, in turn, sent the prices of used cars and trucks soaring 29.7% in May, versus a year ago.
The new-car shortage also is making it hard for rental car companies to restock their fleets after selling off many of their vehicles last year when travel collapsed. Now, demand is far outstripping the already limited supply of rental vehicles, sending prices soaring nearly 110% higher in May than they were a year earlier.
28, of Arlington, Va., wants to travel more now that businesses are opening back up, but he is finding that high prices and scarcity of goods and services are curtailing his ambitions. He is flying to Utah next week for a family event, and had initially planned to tack on a few extra days to explore on his own—only to scrap those plans when he couldn’t find a car to rent.
“My travel this year seems like it’s going to be largely limited to visiting people rather than places because I’m seeing reports of completely booked hotels and, especially, no available rental cars,” said Mr. Stark, a geographic information systems analyst for the postal service.
Still Strong Spending From Home
Furniture, appliances and other home goods: These prices rose sharply during the pandemic and are continuing to climb as people still spend more time at home than before the pandemic. Prices for living room, kitchen and dining room furniture rose 9.8% in May from a year earlier, while prices for bedroom furniture, appliances and indoor plants and flowers rose sharply too.
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