May inflation hits a 41-year high, according to Labor Dept. report

The Labor Department offered proof of what most of us already know: inflation remains historically high.

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The Consumer Price Index rose 8.6%, in May, over a year ago, at the steepest rate since 1981. With virtually everything more expensive, household budgets are pinched.

Soaring gas prices have dominated headlines, up nearly 17% in just a month, and more than double in a year. 

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The May reports also found food prices rose 10%, with meats and eggs even higher. Car prices also remain high, up 16% over a year ago. 

The net effect: we are often paying more for less. Consumer watchdogs are noticing persistent 'shrinkflation', as retailers narrow the sizes of products to hide higher costs. 

"When you go back to the store, double-check it. Then, consider switching brands to one that hasn't downsized, and use unit-pricing on the shelf to see which is really the best deal," says Edward Dworsky of Consumer World.

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In downtown Houston, as the CPI report was being released, activists inflated, what they called, a 7-foot tall 'corporate fat cat', blaming corporate greed for runaway prices. 

"He's here to make sure that they understand, this is a look in the mirror, right now," says Daniel Cohen of the group Houston Indivisible, "You want to see what you look like to the average working-family in Texas? That's what you look like."

On Facebook, FOX 26 viewers shared how prices are affecting them. Nancy Spagna, for example, says, "Shopping the clearance area of supermarkets. No vacation plans. And pray nothing major breaks down!!" while Roger Zewe wrote, "I eat once a day now."

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For economic watchers, the inflation report does not come as a surprise, and some suggest the higher costs of buying and borrowing will eventually cool the economy. 

"Just as fast as these things start, they end," says RIA Advisors financial strategist Lance Roberts. "They're going to end as we move into an economic slowdown or potentially a recession that's going to create that drag, that deflationary pressure."

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Roberts also says there may, already be indications of that slowdown. 

Home sales and mortgage applications have started to slow, which is a major component of charting inflation. 

The remaining curiosity is whether any economic cooling is gradual or so fast that it trips the nation into recession. We may know the answer in the next few months.