Inflation soars as cars, fuel, food and airfares lead price hikes

WHAT YOU NEED TO KNOW:

• The US has registered its biggest inflation surge since the great recession in 2008.
• The overall price surge was led by used cars and trucks as well as rentals.
• Gasoline, airfares, and food have also contributed to inflation.

Since the 2008 financial crisis, the US is now experiencing its largest inflation wave due to rising prices of cars (second hand and car rentals), airfares, food and lodging, as it reopens its economy.

In a report by the Labor Department Tuesday, the consumer price index soared to 5.4 percent versus 2020, the biggest jump since the ‘great recession.’ The inflation climbed by 4.5 percent (volatile food and energy categories not included), the biggest jump since September 1991. As estimated by Dow Jones, the headline and core prices increased by 0.9 percent against the previous 0.5 percent.

According to the Bureau of Labor Statistics data, the surge in overall prices was spearheaded by used cars and car rentals. As the pandemic imposed lockdowns and travel restrictions last year, Americans became very eager to go outside their homes as the country reopens. The price increase was also caused by the global shortage in auto parts and other components.

The Labor Department noted that used car and truck prices increased by 45.2 percent, while car and truck rental costs soared to almost 88 percent based on a 12-month period.

“Consumers have cash in their pockets and rental car companies are looking to rebuild fleets at a time when auto output is being constrained by component shortages,” said ING Economics chief international economist James Knightley.

Per Bank of America economists, this would be the highest price value for the used car since the sticker prices increase had surpassed the used car prices in wholesale, which just started last month.

Various kinds of fuel also gained the largest price hike, which include gasoline, fuel oil and other motor fuels. Over 60 percent of gasoline futures soared as Americans engaged in a post-pandemic travel surge.

Other categories that were linked to the macro-economic landscape have also factored in the rise of inflation.Public transportation registered a 17.3 percent increase over a year while lodging also reported a 17 percent jump.

The Bank of America also noted that the core CPI only rose by 0.18 percent month over month. In the pre-pandemic era, this would be a relatively fair price hike.

In recent weeks, several food and groceries also had a price hike. In particular, service meals, snacks and packaged food as well as fresh fruits are having at least 5 percent hike every year.

Source: CNBC.com