Key takeaways: 

• The inflation rate sends stock markets into a tailspin as S&P 500 drops over 2.6% and Nasdaq down over 3.4%.
• The annual growth in inflation was up from the 8.3% increase in April and higher than economists had anticipated. 
• Inflation is now driving at a rate last seen in ​​December 1981.

Inflation in the US rose abruptly last month to a fresh four-decade high of 8.6%, the labor department stated on Friday.

The latest consumer price index (CPI) figures revealed that the cost of living raised by one percentage point from April and was broad-based, with the indexes for shelter, gasoline, and food being the most significant contributors.

Gas prices have been skyrocketing across the US, approaching $5 a gallon this week – $1.90 almost a year back. According to the latest CPI report, the energy index increased 3.9% over the month, with the gasoline index climbing 4.1%. Other central component indexes also rose. The food index grew 1.2% in May, as the food at home index increased 1.4%.

May’s rise was pushed by sharp gains in energy costs, which increased 34.6% from a year before, and groceries, which jumped 11.9% on the year. Food and energy prices are more explosive than other types included in the CPI, and the labor department issues a “core prices” index, which excludes them. It rose 0.6% from April.