Global MFG - Jul 14, 2021
Surging Prices For Used Cars, Gasoline, Food and Airfares Are Driving the Jump In InflationYun Li and Nate Rattner | cnbc.com
The consumer price index jumped 5.4% from a year earlier, the largest increase since before the worst of the financial crisis, the Labor Department reported Tuesday. Excluding the volatile food and energy categories, inflation increased 4.5%, the largest move since September 1991. On a monthly basis, headline and core prices rose 0.9% against 0.5% Dow Jones estimates.
Looking at item-level data provided by the Bureau of Labor Statistics, prices of used cars and car rentals led the increase in overall prices. The pandemic kept many Americans home last summer, but car rental and sale prices have skyrocketed as many consumers are venturing out of their homes for the first time in months. A global shortage in auto parts and components also exacerbated the price pressures.
For the 12-month period, used car and truck prices leaped 45.2%, while car and truck rental costs skyrocketed 87.7%, the Labor Department reported.
“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,” ING Economics chief international economist James Knightley said in a note.
Bank of America economists believe this may be the peak of used car-price strength as the increase in sticker prices for consumers has now exceeded the jump in wholesale used car prices, which started to moderate in June.
Additionally, multiple types of fuel including gasoline, fuel oil and other motor fuels were among the categories that saw the biggest price increases. Gasoline futures have climbed more than 60% this year as Americans have gone on a post-pandemic driving spree.
Meanwhile, categories tied to the broad economic comeback from the pandemic also contributed to the surge in inflation.
Public transportation, which includes airline fares, recorded a 17.3% jump year over year, while lodging away from home including hotels and motels saw a 16.9% year-over-year burst.
During Memorial Day weekend, air traveler volumes hit the highest levels since before the coronavirus pandemic began. And air travel demand is expected to rebound amid the peak vacation season in the summer.
Excluding price increases in used cars, new cars, lodging and transportation services, the core CPI would have risen only by 0.18% month over month, which in normal times would be a relatively healthy increase in prices, according to Bank of America.
Certain grocery and food item also experienced a price increase as of late. Notably, fresh fruits, limited service meals and snacks and food from vending machines all recorded at least a 5% increase year over year.