Inflation hits highest level in 3 years, adding pressure on household budgets in Chicago area

CHICAGO (WLS) -- New data released Wednesday shows inflation continues to climb, underscoring the financial strain many households are facing, including in the Chicago area.

Prices in May were up 4.2% compared with a year ago, marking the first time inflation has risen above 4% in three years.

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Economists say the increase, while expected, is still significant, as consumers pay more for necessities such as gas and food.

"Prices might continue to go up 10%. What do we do if that happens? How do we start putting away money or preparing for that?" said Jacob Robbins, an assistant professor of economics at the University of Illinois Chicago.

Those are the types of questions families are confronting as inflation reaches its highest level since 2023, with added pressure from the ongoing war in Iran.

"There is a lot of uncertainty right now in the stock market, in the labor market, with prices, and when there's uncertainty, generally what you want to do is you want to make sure that you are financially prepared," Robbins said.

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According to Moody's Analytics, the typical American household is spending $294 more a month on the same goods and services than a year ago, $456 more than two years ago and $667 more than three years ago.

Despite some recent improvement, price increases in Chicago have been especially noticeable at the gas pump.

"Gas prices in Chicago down 52 cents from a month ago, but as I mentioned, still $1 a gallon more than a year ago for the average motorist. That is $15 to $25 every time they fill up," said Patrick De Haan, head of petroleum analysis at GasBuddy.

The oil shortage is also affecting grocery costs.

"Diesel is the one that really drives much of the U.S. economy, from trains to tractors to trucks. It's all diesel. Everything that you see right here behind me has gotten to where it needs to be with diesel," De Haan said.

President Donald Trump on Monday dismissed concerns raised by the new inflation data.

"You know what I really love? I love the inflation. You know why? We've been taking out millions of barrels of oil," the president said.

Trump said millions of barrels of oil are being exported from the Middle East and added that prices will fall after the conflict with Iran is resolved.

In the meantime, data from United Way shows many families are struggling. United Way of Northwest Indiana says 39% of households in northwest Indiana cannot afford the basic cost of living. The organization says the minimum cost for a family of four to live and work in Lake and Porter counties exceeds $80,000 a year.

"That could very well be a young teacher, a kindergarten teacher married to a first year, second year fireman or police officer, and still not earning enough to make all the ends meet month after month," said Chris White, president and CEO of United Way of Northwest Indiana.

The latest inflation report comes a week before the Federal Reserve meets for the first time under new chairman Kevin Warsh.

When inflation rose above 9% in 2022, the Fed responded with a series of interest rate hikes. It remains to be seen how policymakers will respond this time.