PREVIEW: What to Look for in the May Consumer Price Index

06/07/2021 12:00am

(The monthly Consumer Price Index (CPI) is scheduled for release by the Bureau of Labor Statistics on Thursday, June 10th at 8:30 AM Eastern Time.)

Sharp bounce backs led April’s inflation in the price of many items that had price declines in the pandemic. This list included air fares, hotel prices, and car insurance. All three had large price jumps in April. We may see some further rise in the first two in May since their indexes are still lower than the pre-pandemic level. The index for car insurance, which accounts for 1.6 percent of the CPI, is now above the pre-pandemic level, so it can be expected to level off or even decline somewhat in May.

The big uncertainty in the May report will be the index for used cars. This jumped 10 percent for April, accounting for 0.3 percentage points of the increase in the overall CPI. The high prices for used cars is causing many people with cars they seldom use to sell them. It will be interesting to see if this may put some downward pressure on used car prices.

At the same time, it seems that auto manufacturers are overcoming the shortage of semiconductors and getting their factories running again. New vehicle prices rose 0.5 percent in April. The increase in production may not have come soon enough to push prices down in May, but it will likely do so in June.

Rent and medical care are two areas to look for evidence of more rapid inflation. Rental inflation had fallen sharply from roughly 3.5 percent before the pandemic to under 2.0 percent in recent months. If it remains low, it will reduce the risks of an inflationary spiral.

The rate of inflation in medical care had slowed sharply in the recession. The medical index increased just 0.1 percent in each of the last two months. It is up 1.5 percent over the last year. If prices stay under control in the sector, it will be an important factor in holding down inflation.

CEPR produces same-day analyses of government data on inflation, employment, GDP and other topics. 
Follow @DeanBaker13 on Twitter to get his quick-take analysis of government data immediately upon release.

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