Today’s inflation data was terrible, we’re back to 40+ year highs. For some reason it was “higher than expected,” although I certainly expected it. Last month I said price inflation was reaching deep into most sectors and May wouldn’t get the benefit of April’s falling gas prices. Here’s the monthly breakdown:

▪️The CPI was ⬆️1.0% in April for all items and ⬆️8.6% year over year (YoY). This is the most since Dec. 1981. The increase was broad-based, prices rose in ALL major categories and all but one major subcategory! Only physicians’ services (-0.1%) dropped in May.

▪️Food continued to surge, ⬆️1.2% in May (10.1% YoY), the most since March 1981. Food at home was even worse at +1.4% (11.9% YoY), the most since Apr 1979. All 6 grocery store indexes rose, and food at home now has 5 straight monthly gains over 1%, hitting virtually everyone.

▪️Energy more than reversed April’s decline of 2.7%, up 3.9% in May (34.6% YoY), the most since Sep 2005. This was led by gasoline, +4.1% (+48.7% YoY), but even electricity surged 1.3% (+12% YoY). Buying an electric car won’t avoid higher energy costs.

▪️Piped gas was also up a whopping 8% (30.2% YoY), the most since Jul 2008. Fuel oil rocketed +16.9% in May, up an unbelievable 106.7% YoY, the most ever recorded going back to 1935! Unfortunately, energy will likely continue its rise in June.

▪️Other major categories also surged, like new cars, +1.1% (+13.7% YoY) and used cars, +1.8% (+16.1% YoY). Used cars had declined in the prior two months. Both of these categories already made multi-decade highs during the last year, so no new 40 yr highs this month.

▪️The index for all items less food and energy (aka “Core CPI”) was +0.6%, and +6.0% YoY. Core has been slowly decreasing in recent months, but seems to be leveling off and holding steady now at triple the Fed’s target. Sadly, this is probably the best news in this report.

▪️Rent crept up to a 0.6% monthly gain, now +5.2% YoY, the most since Feb 1991. Shelter is by far the largest component of the CPI, and has been steadily rising. It’s still helping the CPI stay lower, but is a sticky index and 0.6% gains will make it tough for inflation to come down.

▪️Airfares spiked again, up a whopping 12.6% in May, following +18.6% in April. It’s now +37.8% YoY, the most since Nov 1980. I’ve been predicting this for months, and still don’t see an end in sight. Hotels also up 1.0% (22.2% YoY). Travel costs are spiking.

▪️The one bright spot is rental cars, which were +1.7% in May, actually falling 0.4% YoY. But this is a fake bright spot, since early 2021 saw a meteoric rise in rental car prices. So it’s a slight drop from that, but you’ll still likely get sticker shock renting a car.

▪️This report showed that price inflation isn’t slowing and continues to reach deep into most sectors of the economy. The experts’ belief that prices will magically slow or come down isn’t materializing. If anything, the danger is it will accelerate toward 10%.

▪️As this meme highlights, wages are now really falling behind. Wages are up 5.2%, while CPI is at 8.6%, which means a pay cut of 3.4%. If this continues, it is not just recessionary, but an inflationary recession coming, a reality few have seriously entertained.

▪️For those wishing to drown their sorrows in alcohol, that’s also +4.0% YoY, the most since Jan 2009. But, distilled spirits (+0.7% Yo) and wine (+1.8% YoY) are still quite muted, cheers 🥂

CPI report:
https://www.bls.gov/news.release/cpi.nr0.htm

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