Retail sales crashed and wholesale prices skyrocketed in May following unprecedented federal spending binges, the U.S. Department of Labor reported on Tuesday. Although most government-mandated lockdowns and school closures related to the COVID-19 pandemic ended months ago, the U.S. economy has been slow to bounce back.
New data from the Department of Labor’s Bureau of Labor Statistics released on Tuesday show that massive federal spending and loose monetary policies from the Federal Reserve have resulted in significant increases in inflation across nearly all goods, services, and sectors of the economy — the biggest inflation spike in 13 years. The latest release shows that producer prices spiked by 6.6 percent during the last year, with prices increasing a whopping 0.8 percent over the last month alone. The rise in producer prices mirrors that of consumer prices, measured by the Consumer Price Index (CPI), which have increased 5 percent over the last 12 months.
At the same time, retail sales also crashed, falling 1.3 percent over the last month, according to data released on Tuesday by the U.S. Census Bureau. After the federal government funneled trillions of dollars into the economy during the pandemic, prices were expected to increase. But following unprecedented lockdowns across the country, multiple congressional spending bills complete with federal increases for unemployment, and worker shortages, Americans have been left with surging inflation and rising prices, meaning they aren’t shopping retail.
Meanwhile, businesses trying to recover from lockdowns are desperate for workers, but with many Americans receiving higher unemployment checks, wage costs have increased rapidly. Many businesses have raised the prices of goods to account for the wage increase, passing off the costs to consumers.
For American families, this means higher prices for everyday items. The cost of food, energy, cars, and transportation services have all increased. According to the Bureau of Labor Statistics, the price of food items has increased 2.4 percent overall in the past 12 months — the price of eggs has increased by 8.2 percent, fresh meat by 8.6 percent, and grains by 5.7 percent. There’s no doubt Americans are paying more for groceries — and prices will continue to increase for at least a year or a year and a half, Phil Lempert of SupermarketGuru.com said in March.
Energy prices shot up 25 percent in one year, with nearly a 50 percent jump for gasoline and nearly 40 percent for fuel oil. Already higher fuel prices and the shutdown of the Colonial Pipeline in May, which supplied about 45 percent of fuel for the East Coast, has raised gasoline prices exponentially. Gas prices surged 9.1 percent in March and are up 22.5 percent since last March.
On Monday, Bank of America CEO Brian Moynihan and hedge fund billionaire Paul Tudor Jones reportedly told CNBC that “it’s time for the Fed to pull back on the easy-money policy it instituted during the pandemic.”
The Federal Reserve will meet Tuesday and Wednesday, where economists expect talk of changing bond-buying policy. Although the Fed is not expected to make any immediate policy moves, many Republican policy-makers are worried about the Fed underestimating the rising inflation rate.
“Inflation fears are a little bit like phantom limb pain in that they actually cut off the problem but it still hurts, and it hurts because the fear is remembered even if the limb is gone,” James Sweeney, chief economist at Credit Suisse, told the Financial Times on Tuesday.