May Inflation Higher than Expected

The question is: for how long and ultimately how much?

Via the NYT: Consumer prices jumped 5 percent in May from year earlier, faster than expected.

The Consumer Price Index surged 5 percent in May from a year prior, the Labor Department said on Thursday. Economists had expected an increase of 4.7 percent. The price index rose 0.6 percent from April to May, compared with forecasts for a 0.5 percent gain.

Core C.P.I., which excludes volatile food and energy costs, rose 3.8 percent from a year earlier, the briskest pace since June 1992.

I am not an economist, so am not going to pretend like I am one for this post (which may, potentially, be a violation of Internet Law). Still, a couple of thoughts occur.

First and foremost, these data, along with ongoing questions about employment figures, underscore that when there is a massive shock to a system (such as, say, a global pandemic) it is quite difficult to fully grasp how the overall economy will respond.

An anecdotal aside: my first (and so far only) post-vaccination plane trip was for a funeral in Texas back in March. I was shocked at both the limited availability and high price of rental vehicles at DFW. I later learned that this was a function of, among other things, the fact the lack of travel during Covid lockdowns and semi-lockdowns led to rental car companies selling off portions of their fleets to stay afloat during the pandemic. There are countless such ripples roiling through the economy at the moment.

Second, as both a political scientist and an American who first became aware of politics in the late 70s/early 80s, I know of the political pitfalls of inflation. And, also, of the overall toll rapid inflation can have on an economy. The US is used to extremely low inflation. And nothing gets people’s attention more than gas and grocery bills jumping noticeably.

This is exactly the kind of thing that could turn the 2022 midterms into a golden opportunity for Republicans because the party of the sitting president will be blamed by the general population for rising prices.

FILED UNDER: Campaign 2022, Economics and Business, US Politics, , , , , ,
Steven L. Taylor
About Steven L. Taylor
Steven L. Taylor is a Professor of Political Science and a College of Arts and Sciences Dean. His main areas of expertise include parties, elections, and the institutional design of democracies. His most recent book is the co-authored A Different Democracy: American Government in a 31-Country Perspective. He earned his Ph.D. from the University of Texas and his BA from the University of California, Irvine. He has been blogging since 2003 (originally at the now defunct Poliblog). Follow Steven on Twitter


  1. Michael Petry says:

    One thing that really gets lost in Internet discussions is scale especially vs expectations.

    What I’ve tried my best but never gotten a good feel for is understanding how much fractions of a percent matter for these various indicators.
    CPI surged 5%, that was higher than the consensus expectation(sounds bad)
    The consensus expectation was 4.7% percent that (sounds not so bad?) I mean, what’s the track record for inflation vs expectations over the last 20 years?
    And does the fact that inflation has consistently been (too low) negate the fact that it’s currently a little bit too high? I mean I know it won’t in the minds of the public, but just in general.

    My gut feeling is that 5% annual inflation isn’t exactly a runaway freight train, but if its the low water mark rather than the high water mark the economy could see some serious headwinds.

  2. gVOR08 says:

    An annualized 5% for a month. OMG, we’re all gonna die!

    Kevin Drum figures it’s really more like 3.5. He links to his post a day or two ago explaining the May to May number compares to a period of deflation as a base.

    Keep in mind that since the 2008 W. Bush crash the Fed has been trying, and failing, to push inflation UP to a target of 2%.

  3. inhumans99 says:

    I am with KD on this (I see that gVOR08 is also an avid KD reader), not the end of the world. I would like to note James that this only becomes an issue in the 2022/2024 election years if Biden and his team let it become an issue.

    Biden has a competent Press Secretary who is not just interested in scoring points or zinging the press so Biden’s PS can deliver actual facts to the American Public via the Press (my understanding is Trump’s PS sometimes just made sheet up if she thought she score points against the dreaded mainstream media folks at her Press Conferences), and there are other confident (I meant to type competent, but confident also works so I am leaving it alone) folks around Biden who can tamp down any fires that the GOP tries to light up regarding this subject.

  4. @gVOR08: @inhumans99: Don’t get me wrong: I am not hitting the panic button.

    But, there is a brewing narrative and there are real examples of inflation in the broader economy. Gas, for example, is inevitably going to be more expensive than it was for wholly understandable and sound economic reasons. That won’t stop some people from asserting/believing that it is Biden’s fault somehow and, therefore, influence the 2022 elections.

    And prices are up for a number of things that are quite noticeable (food, construction materials, used cars). So, not doom and gloom, but not nothing, either.

  5. Stormy Dragon says:

    Another important thing to remember is that CPI fell 25% in March-April 2020, so almost all of this “inflation” is just a return to the pre-pandemic price levels now that things are returning to normal:

  6. @Stormy Dragon: That’s not how I read that chart unless you are talking about car rentals, but even then the current increase in inflation in the area is well above simply a return to normal.

  7. gVOR08 says:

    @Steven L. Taylor: sorry if my comment seems aimed at you. Really at the utterly predictable reaction we already see from the supposedly liberal MSM. And Fox et al will have a field day.

  8. Stormy Dragon says:

    @Steven L. Taylor:

    Yeah, I misread the chart, so the 25% number is wrong, but the central point about this being a return to baseline is still correct. Inflation is up only 3.5% Jan 2020 – Apr 2021, which isn’t far off the 2%/year target.

  9. @gVOR08: I didn’t really think it was aimed at me, but wanted to clarify just in case.

  10. JohnMcC says:

    We have increased our demand for ‘stuff’ (a technical term) and squashed our production/distribution, we’ve buried at least 600K to 750K of our friends and neighbors and we’ve invented and distributed some 300K to 400K doses of vaccine.

    And prices are 5% higher than they were when we were ‘locked-down’ and with gasoline likely to have a higher-than-normal seasonal spike.

    Try to imagine my panic-stricken face:

  11. Jc says:

    CPI is bunk. What has been inflation rate of things I spend most of my money on i.e. healthcare, education, housing…the things that we spend most money on vs “CPI-U” over the past two decades. Guess we will see if this is transitory…which is a nonsensical thing for the fed to say as well, but when you help create an issue you say things like that I suppose. What do we expect when we rain money everywhere.