As we wrote yesterday, CPI was up 8.6% year-on-year ("YoY") in May---the fastest pace in 40 years. A significant driver of headline inflation was record gas prices, though core CPI (excluding volatile food and energy components) was also worse than expected, rising 6.0% YoY. While core CPI may be a better measure for policy making, food and energy prices impact people more urgently and intensely. Energy costs are 34.6% higher compared to a year ago, driven by a nearly 50% jump in gas prices. As a result, the typical US household is spending about $460 more every month than they did last year to purchase the same basket of goods and services. AAA's tracking of gas prices shows the price of a gallon of regular gas nationwide was over $5.00 for the first time on June 12, 2022. (Click chart to enlarge)
California had the highest average gas prices at $6.43/gallon, while Georgia had the lowest at $4.48/gallon. Nearly half the states average gas prices of $5.00/gallon or more. Higher fuel costs are making travel, food and other products more expensive across the economy.
Higher energy prices are supposed to reduce demand, but there's no sign yet of the so-called "demand destruction." Road travel in the busy summer season has remained relatively strong, just a couple of percentage points below pre-pandemic levels. That just means inflation, which was supposed to have peaked in April, will likely continue to go up.
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