- Consumer prices increased +5% for the 12 month period ending in May
- This +5% uptick in inflation comes after Aprilâ€™s +4.2%
- Overall increase +.08% m/m
Prices Soaring for Some Things
The US Labor Departmentâ€™s latest monthly report on consumer prices indicates that prices increased +5% for the 12-month period in May.
This May increase of +5% comes right behind Aprilâ€™s uptick of +4.2% in consumer prices, or a month-to-month increase of +0.8%.Â This is the highest increase in consumer prices since August 2008.
Economy is â€œRed Hotâ€
Warren Buffett said the economy is â€œred hot.â€Â Buffett added, â€œIt just wonâ€™t stop.Â People have money their pocketsâ€¦it is not a price-sensitive economy right now.â€
Check Out These Price Increases
Itâ€™s not just houses.Â Take a look at these price upticks over the last year:
- Used cars – +29.7%
- New cars – +3.3%
- Cost of rental cars â€“ doubled
- Airfares – +24.1%
- Chipotle menu prices – +4%
- Rent of primary residence – +1.8%
Plus, you may find that your neighborhood StarbucksÂ could be short on ingredients and supplies.
Supply chain snarls that are causing key shortages of products such as computer chips for cars, smartphones, televisions, washing machines and refrigerators are one big factor in both product shortages and higher prices.
According to Goldman Sachs, this shortfall in computer chips and semiconductors is likely to last until at least this fall and perhaps in 2022
Why? Because the Taiwan Semiconductor Manufacturing CompanyÂ produces approximately 80% of microcontroller units worldwide.
Add US government sanctions on Chinese tech companies and extreme weather to the mix.
â€œCOVID-19 is still a major consideration, but it is no loner the main bottleneck,â€ said Canalysresearch manager.Â â€œSupply of critical components, such as chipsets, has quickly become a major concernâ€¦â€
And, like Warren Buffett said, â€œPeople have money in their pocketsâ€¦â€ and demand for products is sky-high.
Are Inflationary Pressures Already Easing?
The March to April jump in prices was much more than the +0.6% jump in prices from April to May when prices jumped +4.2%..
Investors think this slight price increase from April to May is good news.Â Just take a look at the rising Dow Jones Industrial Average.Â It was up about +.05% the morning of this consumer price announcement from the Labor DepartmentÂ was madeand yields on 10-year government bonds (highly sensitive to inflation concerns) remained flat.
Julia Coronado, founder of MacroPolicy Perspectives, said, â€œWe are at peak heat, this is the moment.Â We know weâ€™ll get a fade â€“ they question is, how big a fade?â€
Janet Yellen, US Treasury Secretary, said last weekend, â€œWhile weâ€™re seeing some inflation, I donâ€™t believe itâ€™s permanent.Â Weâ€™ll watch this very carefully, keep an eye on it and try to address issues that arise if it turns out to be necessary.â€
Thanks to National Public Radio, The New York Times and the US Labor Department.
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