Some economists have counseled patience. The Fed has kept its federal funds rate, which influences the other interest rates in the economy, at the same level — about 5.5% — since last summer.
Thanks to other external forces, especially the normalizing of supply chains following pandemic disruptions, the prices of many key consumer items have largely stopped climbing, and in some cases — as with airfare, autos and many electronic goods — are now declining.
Today, the bulk of ongoing price increases are coming from housing costs, referred to by the BLS as shelter prices.
While those have declined on an annual basis each month since April 2023, they are still above 5%.
“Stuck is a good word,” said Mark Franceski, managing director at Zelman & Associates, a housing market research and consultancy group.
While some so-called spot measures of rents from groups like CoreLogic and Zillow are showing price declines in some cities, the BLS survey of shelter costs is uniquely designed to capture changes in the value of housing, Franceski said.
The survey has recently come under scrutiny, with critics saying it does not accurately reflect how consumers experience housing costs. For instance, it asks homeowners how much they think they could rent their house for if they decided to do so — an anecdotal data point rather than one rooted in day-to-day spending.
But Franceski said it nevertheless expresses a value of the type of good that all households consume.
“They’re getting a decent read,” he said of the BLS housing cost survey.
Election implications
Even if inflation data were to improve over the next several months, surveys suggest consumers are still catching up to a new, higher-cost environment.
Since the onset of the Covid-19 pandemic in the spring of 2020, the CPI has climbed a cumulative 22%.
It’s one reason why measures of consumer confidence remain below pre-pandemic levels.
Erik Lundh, senior global economist at The Conference Board economic insights group, estimates the amount of inflation that’s accumulated since the pandemic is equivalent to the price increases that occurred over a 10-year period following the 2008-2009 global financial crisis.
“It takes time for consumers to digest that amount of increase,” he said. “When you stretch it over a decade, memories fade about what you were paying 10 years ago at the grocery store — but not three years ago. So the inflation we have seen is fresher in the mind, and that’s really weighed on them.”
It’s also why at least one survey still shows 58% of registered voters disapprove of Biden’s handling of the economy, while 41% say they trust Donald Trump, who is running for a second term in the White House, most to handle the economy compared with 37% for Biden.
In fact, multiple surveys have showed a majority of Americans wrongly believe the U.S. economy is in a recession, despite a still-historically low unemployment rate of 4%.
As a result of inflation, along with high interest rates and uneven wage gains, “Consumers have been pretty consistently gloomy about the outlook over the next 12 months,” Lundh said.
The post Inflation report for May 2024 reveals how the U.S. economy is looking now appeared first on NBC News.