Transitory or Not, Inflation Is Here. It Could Be Much Higher Than You Realize
Frank Holmes | Jun 14, 2021 03:29PM ET
I’ve been writing about the possibility of higher inflation for months, and now it looks to have finally made landfall. May’s headline consumer price index (CPI) came in at 5% year-over-year, the highest in over a decade.
The real rate is likely even higher.
Energy commodities, and gasoline in particular, jumped the most of any other measured item. Energy increased 54.5% year-over-year, gasoline 56.2%, as oil prices hit multi-year highs this week on strong travel demand. A barrel of West Texas Intermediate touched $71 today, a level we haven’t seen since October 2018.
Take a look at what happens when you strip out volatile energy and food prices. Core inflation, as it’s called, surged 3.8% compared to last year—which doesn’t sound impressive until you realize that’s the fastest rate in nearly 30 years. The last time we saw core inflation this high, the top films in America were White Men Can’t Jump and Basic Instinct, and General Motors (NYSE:GM) topped the list of Fortune 500 companies.
I hope no one reading this is in the market for a new car right now. Thanks to the ongoing semiconductor chip shortage, the supply of new vehicles has all but evaporated, pushing up the price of previously owned cars and trucks. The Manheim Used Vehicle Value Index hit a fresh all-time high in May, suggesting a 48% increase in prices compared with last year. Pickup trucks were up a staggering 70%.
Expectations are mixed for how much longer the chip shortage will last. Goldman Sachs chief Asia economist Andrew Tilton told CNBC last week that he believes we’re in “the worst period” right now, insinuating we’ll see resume a number of international flights this month, from Canada to India, Mexico, the Caribbean and more.
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The S&P 500 Stock Index is a widely recognized capitalization-weighted index of 500 common stock prices in U.S. companies. The consumer price index (CPI) measures the average change in prices over time that consumers pay for a basket of goods and services, commonly known as inflation. The Fortune 500 is an annual list compiled and published by Fortune magazine that ranks 500 of the largest United States corporations by total revenue for their respective fiscal years. The Manheim Used Vehicle Value Index is a time-series measurement of wholesale used vehicle prices.
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