Consumer Price Index surges 5%
BIRMINGHAM, Ala. (WBRC) - The Consumer Price Index, the basket of goods the government tracks to judge how prices are moving up and down, jumped 5% since last year. Analysts said that’s the biggest one-year inflation spike since 2008.
Experts said the surge in prices is due to a growing demand of goods and services as the economy recovers from the pandemic.
But the big question remains: will this increase be short-lived or something consumers should worry about?
“The most recent Consumer Price Index number, which was in May, was coming off, or was being compared to a pretty big low in May of 2020. So, it was to be expected that we were going to see some level of increase year over year. I think it came in a little bit hotter than expected.”
Marshall Clay with The Welch Group said prices are rising for everything from everyday necessities to luxury products.
He said one of the biggest surprises was the increase in used car prices, which was impacted by supply disruptions in the car manufacturing industry.
“The jury is still out on whether we’re going to see increases in rents. I would suspect that we probably will see that, particularly if you look at the housing market right now. I mean, it’s just exploded over the last year,” Clay said.
He said increases in goods and services will likely continue for the foreseeable future.
That’s because more money was pumped into the economy through stimulus payments even as everything shut down.
“When you get that dynamic, you’re going to see price increases. So, what the Federal Reserve is saying is that as we sort of move out of COVID, as people get back to work, as the production of goods and services starts to increase, we should see some of those prices start to come down,” Clay explained.
So, is inflation temporary or something we’re going to continue to see? Clay said that’s the question no one really has the answer to right now. But he said all of this could have damaging affects to the economy if wages can’t keep up with inflation.
Copyright 2021 WBRC. All rights reserved.