Why Inflation Is Hitting American Households Like Never Before

Economists like to strip food and energy out of their inflation calculations. They’re too volatile to be meaningful, they say. But for everyday Americans coping with exploding prices, those items are pretty much all they care about right now.

For two straight months, the primary consumer expenses — fuel, power, and grocery-store food — have all been rising at double-digit annual rates for the first time since 1981. And data out Friday are likely to show a further surge in those unavoidable areas of spending. The Biden administration may want to draw focus to the ultra-low jobless rate to tout a strong economic recovery, but it’s inflation on everyday expenses that has become the topic of conversation at kitchen tables across the country.

“You normally wouldn’t see both of these things happening at the same time,” said Omair Sharif, founder of Inflation Insights LLC, referring to soaring energy and food prices. In the past, any stretch of high inflation in a single category would likely be isolated and pass in a few months’ time, he said. “And now, nothing is well-behaved.”

Some economists had been predicting that March was the “peak” for US inflation this cycle as annual price increases for consumer discretionary items like furniture, apparel and appliances have started to come off the boil. But that’s not the reality Americans are living in day-to-day life, with gas prices around $5 per gallon and grocery prices rising at the fastest pace in more than four decades.

This week’s consumer price index report is forecast to show annual inflation rising at a pace of 8.2% in May, a very slight slowdown from the prior month but still more than four times the levels experienced before the pandemic. “Core” inflation, which strips out those traditionally volatile food and energy categories, is expected to slow a bit more. But food, power and fuel could very well go in the other direction.