Friday’s inflation report was a triple-whammy for consumers, with massive price hikes in food, shelter and energy — sectors that make up the majority of household expenses — as well as in almost every other category.
But some of the starkest increases were in the food-at-home sector, where the cost of groceries surged by almost 12% for the year ending in May. That’s the largest year-on-year increase since 1979.
Categories experiencing the largest jump in prices are typically meal staples: dairy, eggs and meat.
The price of eggs rose by 32.2% from May 2021 to May 2022, according to the latest CPI. Meats, poultry and fish saw a 14.2% year-over-year increase, and dairy products jumped 11.8%.
“Food and fuel are driving inflation and creating pain points for American households,” said Joe Brusuelas, chief economist at RSM, in a Friday note.
With 70% of the US economy driven by the consumer, economists are closely monitoring changes in behavior. The latest monthly consumer sentiment survey from the University of Michigan showed that confidence in the economic outlook plummeted in early June to its lowest level on record.
“We need to listen to what consumers say but, more importantly, we need to watch what consumers do,” said Jeffrey Roach, chief economist for LPL Financial.
“We do expect a slowdown in consumer spending as inflation and uncertainties weigh heavily on sentiment,” he said in a statement.
The Federal Reserve, tasked with a dual mandate of maintaining price stability and maximum employment, is raising interest rates as a way to mitigate rising inflation and cool down the economy, but it is far from an overnight process.
While the inflation report brought new attacks on the Biden administration from Republicans, the White House sought to blame the worst of the inflation on the rise in oil and gasoline prices after Russia invaded Ukraine.
“Today’s inflation report confirms what Americans already know. Putin’s price hike is hitting American hard,” President Joe Biden said at the Port of Los Angeles, where he was pausing from a regional summit to address what his team views as the most pressing current issue: high prices on everything from gas to groceries.
Biden sought to both acknowledge the pain Americans are feeling, explain how he was looking to solve it and pin blame on others.
“I understand,” Biden said. “Inflation is a real challenge to American families.”
He lambasted shipping conglomerates for raising prices and oil companies for their stock buybacks, singling out oil giant Exxon for making “more money than God” last year.
— CNN’s Kevin Liptak contributed to this report.