15% More For Meat, 5.1% More For Alcohol; CA Prices Skyrocket Again

CALIFORNIA — A highly anticipated inflation report landed with a thud Friday, telling financial markets what most Golden State families know all too well: Prices are still skyrocketing.

Prices rose more rapidly than expected in May, with the consumer price index hitting a 40-year high.

Prices climbed 8.6 percent in May compared with the same month a year ago, and were up a whopping 1 percent over April, according to the report by the U.S. Bureau of Labor Statistics. The 8.6 percent jump was the sharpest year-over-year spike since 1982.

The report doused hopes that supply chain issues had eased and that tightening monetary policy would rein in inflation.

The news sent stock indexes plummeting. The Dow Jones Industrial Average sank 816 points, or 2.5 percent. The S&P 500 slid 2.8 percent, and the Nasdaq composite dropped 3.5 percent Friday morning, CNBC reported.

“It just reinforces the impact the CPI number had on the consumer psyche. We can guess this is going to have a negative future impact on consumer spending. It’s a shocking number, but this is what inflation does when it’s running as hot as it is,” Peter Boockvar of Bleakley Advisory Group told CNBC.

The news came just a month after signs emerged that inflation might finally slow. In April, prices rose just 0.3 percent compared to March, according to the Bureau of Labor Statistics report.

But surging prices and declining 401(k)s are hitting everyday families hard.

Surging prices for food, gas and housing, in particular, put the squeeze on Golden State residents, according to the report Friday from the Labor Department.

In the West, food prices rose 9.8 percent, and energy prices jumped 31.7 percent. Both were driven by an increase in the price of gasoline, according to the Bureau of Labor Statistics

California residents pay about 15 percent more for meat, poultry and eggs; 11.4 percent more for milk; and 9.5 percent more for fruits and vegetables than last year. It cost 6 percent more to put clothes on their backs, and 5.1 percent more for alcohol. Housing costs spiked by 6.7 percent across the West.

Nationwide, the index for all items increased 8.6 percent for the 12 months ending May, the largest 12-month increase since the period ending December 1981. The index for all items less food and energy rose 6.0 percent over the last 12 months.

The energy index rose 34.6 percent over the last year, according to the Bureau of Labor Statistics. The last time the nation saw gas prices inflate so quickly over the course of a year was in the period ending September 2005.

The food index increased 10.1 percent in May over a year ago, the first increase of 10 percent or more since the period ending in March 1981.

President Joe Biden traveled to the Port of Los Angeles Friday to discuss efforts to streamline global supply chains and counter rising prices, painting the issue as a worldwide problem fueled largely by Russian aggression in Ukraine.

In a statement released ahead of his late-morning speech at the USS Iowa battleship, Biden referred to "Putin's price hike" leading to record-high gas prices and increases in the cost of energy and food.

"My administration will continue to do everything we can to lower prices for the American people," he said in his statement. "Congress must act urgently as well. I call on Congress to pass a bill to cut shipping costs this month, and get it to my desk, so we can lower the price of goods. And, I call on Congress to pass legislation to cut costs for families like energy bills and prescription drugs."

He added: "The deficit has come down more under my watch as president than at any time in history, but if Congress would pass tax reform to make the wealthiest Americans and big corporations pay their fair share, we could reduce this inflationary pressure even more. These are the most significant things Congress can do to help families now and complement the Federal Reserve's efforts to bring inflation down."

Biden laid blame squarely on Russia for increases at the gas pump, noting that the United States was on pace to produce a record amount of oil next year, with efforts underway to increase that amount.

"But it is also important that the oil and gas and refining industries in this country not use the challenge created by the war in Ukraine as a reason to make things worse for families with excessive profit taking or price hikes," he said.

The average gas price in California stood at $6.42 for a gallon of regular gas, compared to the national average of $4.99 a gallon Friday, according to AAA.

"We all have work to do to get inflation down. What will not help is the plan by some Republicans in Congress to raise taxes on the middle class and working families. That would be a step in the wrong direction, and I strongly oppose it," Biden added.

For most Americans, inflation was running far ahead of the pay raises that many received in the past year, making it harder for them to afford necessities such as food, gas and rent. As a consequence, inflation has become the top political threat to Biden and congressional Democrats as the midterm elections draw closer. Small business people said in surveys that it’s their primary economic concern, too.

To beat back inflation, the Federal Reserve planned to raise interest rates several times in 2022. In May, the Federal Reserve increased its benchmark interest rate by half a percentage point — its largest increase in two decades.

It’s a delicate challenge for the Fed, which risks undercutting the economy and possibly triggering a recession if it tightens credit too aggressively, The Associated Press reported.

Regional Variations

In the nation's most populous states, prices varied dramatically by region.

The most recently available data showed how much more consumers in California paid for goods and services.

Prices around the greater Los Angeles area were 8 percent higher in May over the same month a year earlier.

Food prices were 8.4 percent higher. Energy prices were up 33.4 percent. The index for all items excluding food and energy was 5.8 percent higher.

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In the Bay Area, prices were up 5 percent in April compared with the same month in 2021.

Food prices were up 10.2 percent year-over-year in April (the most recent data available for the Bay Area). Energy prices spiked 31.1 percent. The index for all items excluding food and energy was 2.7 percent higher.

The Associated Press and City News Service contributed to this report.