A used car dealer can be seen in Laurel, Maryland on May 25, 2021 as new car dealerships across the country are running out of new cars as a shortage of computer chips has caused production to near-halt at many vehicle manufacturers.
Jim Watson | AFP | Getty Images
Price increases in used cars, car rentals – as well as a rebound in airfare, accommodation, and groceries – are behind the biggest inflation spike since 2008, when the US economy reopened.
The consumer price index rose 5.4% year over year, the largest increase since the worst of the financial crisis, the Labor Department reported Tuesday. Excluding the volatile food and energy categories, inflation rose 4.5%, the largest move since September 1991. On a monthly basis, headline and core prices rose 0.9% from a Dow Jones estimate of 0.5%.
Looking at the item-level data provided by the Bureau of Labor Statistics, prices for used cars and car rentals drove total prices up. The pandemic kept many Americans at home last summer, but car rental and sales prices have skyrocketed as many consumers venture out of their homes for the first time in months. A global shortage of auto parts and components also exacerbated price pressure.
Over the 12 month period, used car and truck prices rose 45.2% while car and truck rental costs skyrocketed 87.7%, the Department of Labor reported.
“Consumers have cash in their pockets and rental car companies want to rebuild their fleets at a time when auto production is constrained by component shortages,” ING Economics’ international chief economist James Knightley said in a note.
Bank of America economists believe this could be the peak in used car prices as the rise in sticker prices for consumers has now outpaced the rise in wholesale used car prices, which moderated in June.
In addition, several types of fuel, including gasoline, heating oil, and other fuels, were among the categories with the greatest price increases. Gasoline futures are up more than 60% this year as Americans took a car trip after the pandemic.
Price recovery for airfare, food and accommodation
Meanwhile, categories linked to the pandemic’s broad economic comeback also contributed to the inflationary surge.
Local public transport, which includes airfare, was up 17.3% year over year, while home accommodation, including hotels and motels, was up 16.9% year over year.
On Memorial Day weekend, air travel reached its highest level since the coronavirus pandemic began. And the demand for air travel is expected to recover during the peak summer vacation season.
Had it not been for used vehicle, new car, lodging and transportation price increases, core CPI would have only increased 0.18% m / m, which Bank of America says would be a relatively healthy price increase in normal times.
Certain foods and foods have also seen their prices rise recently. In particular, fresh fruit, limited-service meals, and snacks and food from vending machines all saw at least a 5% year-over-year increase.
PepsiCo and Conagra Brands announced Tuesday that they plan to pass higher input costs on to customers as inflation accelerates. The two named rising costs for some ingredients, freight, and labor.
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