Pockets of the U.S. economy (housing and autos, for instance) are on fire — and consumers are having to pay more than they have in years, fresh inflation data today showed.
Why it matters: “Not everybody’s wages are going up fast enough to keep up with these price increases,” David Wessel, a senior fellow at the Brookings Institution, tells Axios.
- In most cases, essentials — and the nice-to-haves — cost more now than before COVID-19 wrecked the economy.
What’s happening: Prices in May for floor coverings, tools and outdoor equipment, plus moving and storage, saw the biggest monthly spike in records that go back to 1957.
- An index that tracks furniture prices jumped the most in 45 years.
- And then there’s used car prices, which rose more than 7% in one month alone — after a 10% gain the prior month.
The big picture: Prices rose 5% from May 2020, a time when costs drifted lower as the world shut down. It was the biggest annual spike since 2008 — though the monthly pace (0.6%) slowed from April’s.
- Blame the “supreme imbalance between supply and demand coming out of the pandemic,” says Nationwide economist Ben Ayers.
What they’re saying: Roughly half of the inflation rise came from autos, car rentals and airfares.
- “[A] narrow range of categories are accounting for a majority of the advance, and their contribution is unsustainable,” Bespoke Investment Group’s George Pearkes tweeted.
- Put plainly, these price spikes may not stick around.
The bottom line: “[O]nly apparel prices are lower, by around 4%, than they were on average in 2019,” says Cailin Birch, an economist at the Economist Intelligence Unit.
- Prices for all other categories “have recovered … above (or in some cases well above) pre-pandemic levels.”