Used cars and trucks drove much of May's steep inflation number


The Labor Department reported Thursday that consumer prices jumped 5 percent in May versus a year earlier. That's the biggest rise in inflation since 2008, and it was steeper than expected, but "right now, it's a yellow traffic light situation," The Washington Post reports. "People are on alert, but there's no panic or slamming of brakes."
There are two main reasons economists and nonpartisan policymakers aren't panicking: First, prices were really low last May due to the COVID-19 pandemic, making a return to normal prices look dramatic, and second, the price increases for many products were due to temporary shortages in supply or materials. Those factors loomed large in the six categories of goods and services that accounted for half the jump in the consume price index (CPI), Bloomberg economists calculate: Used cars, rental cars, car insurance, airfares, hotels, and restaurants.
And of those six categories, used cars and trucks account for about a third of the total monthly CPI increase, the Labor Department says. A dearth of new cars, due largely to production delays caused by a pandemic-related global semiconductor shortage, "has tightened the supply of used cars as owners hold on to their vehicles longer — which, in turn, sent the prices of used cars and trucks soaring 29.7 percent in May, versus a year ago," The Wall Street Journal explains. And because rental car companies can't restock fleets of cars they sold off last year amid slumping demand, prices for car rentals soared 110 percent in May.
The Week
Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.

Sign up for The Week's Free Newsletters
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
"As the economy adjusts to a post-pandemic world," the Post says, "suppliers will adjust. Shortages will dissipate. Factories will eventually produce more furniture, washers, cars, and computer chips," and the price increases will likely be short-lived. However, "price increases on services, including rent, often stick around for years to come, especially if companies bump up wages by several dollars," the Post explains. "Businesses often turn around and pass those extra costs on to consumers. Then employees ask for more pay again and the price hike cycle begins."
A free daily email with the biggest news stories of the day – and the best features from TheWeek.com
Peter has worked as a news and culture writer and editor at The Week since the site's launch in 2008. He covers politics, world affairs, religion and cultural currents. His journalism career began as a copy editor at a financial newswire and has included editorial positions at The New York Times Magazine, Facts on File, and Oregon State University.
-
October 13 editorial cartoons
Cartoons Monday's political cartoons include Donald Trump's consolation prize, government workers during shutdown, and more
-
Can Gaza momentum help end the war in Ukraine?
Today's Big Question Zelenskyy’s request for long-range Tomahawk missiles hints at ‘warming relations’ between Ukraine and US
-
The Israeli hostages and Palestinian prisoners being released
The Explainer Triumphant Donald Trump addresses the Israeli parliament as families on both sides of the Gaza war reunite with their loved ones
-
Gold tops $4K per ounce, signaling financial unease
Speed Read Investors are worried about President Donald Trump’s trade war
-
Electronic Arts to go private in record $55B deal
speed read The video game giant is behind ‘The Sims’ and ‘Madden NFL’
-
Trump proposes ending quarterly earnings reports
Speed Read The SEC would have to approve any changes
-
Rupert Murdoch's conservative son wins succession battle
Speed Read Lachlan Murdoch will get control over the media empire that includes Fox News and The Wall Street Journal following his father's death, while his siblings will receive payouts
-
Why are global postal services cutting off package delivery to the US?
Today's Big Question 'Uncertainty' around new tariff rules halts small-dollar imports
-
New York court tosses Trump's $500M fraud fine
Speed Read A divided appeals court threw out a hefty penalty against President Trump for fraudulently inflating his wealth
-
Trump said to seek government stake in Intel
Speed Read The president and Intel CEO Lip-Bu Tan reportedly discussed the proposal at a recent meeting
-
US to take 15% cut of AI chip sales to China
Speed Read Nvidia and AMD will pay the Trump administration 15% of their revenue from selling artificial intelligence chips to China