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Household budgets were already tight. Then came inflation.

Inflation rises as U.S. economy rebounds
Inflation rising as U.S. economy rebounds from the pandemic 06:23

Abby Walter said she started noticing her grocery bill creeping up earlier this year. Prior to January, the Maryland resident had typically spent about $75 a week on groceries. Now her bill is averaging about $150 or even more. 

Some of that increase is likely due to a change in where Walter shops for groceries. Because of a move, she and her partner stopped shopping at a discount market near their previous home. Even so, she's noticed that prices are just generally creeping up — and up and up. Produce, eggs, meat and bread all cost more than they used to, Walter said. That's causing them to rethink their budget.

"It means that we can't buy a lot of the more fun things that we want," Walter, a 29-year-old wildlife biologist, said. "We probably won't be traveling as much, we probably won't buy clothes even though we'll be going back to the office soon."

Like Walter, other Americans are experiencing the dollars-and-cents reality of higher inflation. Consumer prices rose 0.6% in May — pushing the annual inflation rate to 5% over the last 12 months — the Labor Department said Thursday. That represents the fastest rate of increase since August 2008 and reflects the impact of sharply higher demand as consumers resume dining, shopping and traveling as the economy reopens. 

Some food manufacturers and grocers are turning to "shrinkflation" to manage shoppers' expectations, packaging food in smaller containers while charging the same amount. And it's not only grocery prices that are on the rise. Used car prices jumped more than 7% last month, while household furnishings and airfares also jumped, according to Morgan Stanley. 

U.S. consumer prices climb at fastest pace since 2008 02:12

"That summer vacation may come at a premium," Greg McBride, chief financial analyst at Bankrate, said in an emailed statement. "Airfares increased 7% over one month ago and car and truck rental prices have more than doubled in the past 12 months. As more capacity comes online, these trends will ease — but when that happens is still anyone's guess." 

Inflation is picking up steam due to increased demand from consumers, as well as bottlenecks in some industries. Lumber has tripled in price during the coronavirus pandemic, following slowdowns at some mills during the crisis, adding thousands of dollars to the cost of a new house and increasing costs for even simple home renovations.

To be sure, many economists believe inflation will ease later this year as supply catches up with demand in grocery aisles and other stores and marketplaces. But until then, consumers may feel the pinch in their pocketbooks. 

Pandemic budgets

The pain may be more acute for households still recovering from the pandemic, as well as those on fixed incomes, such as seniors who depend on Social Security for the bulk of their income. 

A quarter of Americans struggled to pay their household expenses in the previous week, according to a Center on Budget and Policy Priorities analysis of Census survey data from early May. And about 1 in 10 adults, or 19 million people, said they struggled to provide enough food for their families to eat within the prior seven days, the data show. 

Senior citizens, meanwhile, are stuck between rapidly rising costs and a cost-of-living increase that's not keeping pace, at least for 2021. The Social Security Administration, which adjusts payments each fall for the following year, increased 2021 payments by 1.3%. That means Social Security checks aren't keeping up with the price increases hitting wallets this year. 

Prices surge and consumers feel the pinch as U.S. inflation fears grow 04:45

"What we are getting into now is seniors have received a 1.3% [cost of living adjustment] for 2021, and these rising costs are occurring right now, so they are very poorly prepared for this type of inflation," said Mary Johnson, a policy analyst at the Senior Citizens League.

And that comes after a 30% decline in buying power since 2000 for Social Security payments, according to a May study from the Senior Citizens League. That may erode even further if inflation continues to surge ahead, the report warned. About one-quarter of the more than 60 million seniors who collect Social Security rely on the payments for 90% of their income, the group says.

"For every $100 a retired household spent in 2000, that household can only buy about $70 worth of the same goods and services today," the report noted. 

  • Tune in on Monday at 8 p.m. and 11 p.m. ET for "Employment in America: A Shifting Workforce." The hour-long CBSN special will offer a deep-dive on the state of employment and will include valuable information for job seekers and career changers. Download the CBS News app to watch live on your cellphone or connected TV.

There will be some relief in 2022, with Johnson and other experts predicting that next year's cost of living adjustment for Social Security could range between 3% to 5%, depending on what happens with inflation over the next few months into the fall. But until then, consumers may need to postpone purchases or look for cheaper alternatives. 

"We've been through a crazy period, and prices are just going to bounce around a lot until things simmer down," said Alicia Munnell, an economist and the director of the Center for Retirement Research at Boston College.

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