Federal Data Shows Inflationary Pressure Continues

A federal report released last Friday put a damper on hopes that inflation could be cooling. New data from the U.S. Bureau of Labor Statistics (BLS) showed that the Consumer Price Index jumped 1 percent in May — far more than the 0.3 percent rise in April — leading to an 8.6 percent rise year-over-year. This is the largest 12-month increase of the index in more than 40 years.

Just days before this news, Treasury Secretary Janet Yellen faced tough questioning on Capitol Hill from legislators on both sides of the political aisle whose constituents are struggling with soaring costs. While Yellen affirmed that the country was facing “unacceptable levels of inflation,” she expressed hope that it would subside.

At least in May, that hope was not realized. BLS showed price increases across its index, especially for shelter, gasoline, and food. Indeed, shelter’s 5.5 percent increase is the highest 12-month gain since 1991, and food’s 10.1 percent rise is the biggest since 1981. Energy costs, which increased 3.9 percent in May, are up 34.6 percent for the year.

During a Senate Finance Committee hearing featuring Yellen, Sen. John Barrasso (R-Wyo.) alluded to the problem such rampant inflation poses for charitable efforts. He said that Meals on Wheels volunteers in Wyoming have curtailed their efforts, “not because they dont have the time or the commitment or the open heart… they dont have the money for the gas.”

Philanthropy Roundtable has called this 40-year high in inflation “inescapable and unsustainable” — a problem that “is testing the financial stability of nonprofit organizations which managed to survive the pandemic.” Indeed, with food, energy, and other items costing more, ministries are feeling strain as they attempt to keep up efforts to meet ever-increasing community needs.

Even as dollars are worth less for staffing and operations, they may become harder to come by as donors feel inflation’s pinch. Earlier this year Dr. Leslie Lenkowsky of Indiana University’s Lilly Family School of Philanthropy wrote, “Facing higher prices for essential purchases, ordinary givers are unlikely to increase contributions enough to compensate for lowered purchasing power.” And he suggested wealthier donors may also cut back if their assets are vulnerable to inflation.

Like other observers, Lenkowsky suggests inflationary pressures could soon abate. However, with an eye on the extended era of inflation in the 1970’s, he added, “This is uncharted territory for most nonprofit leaders today. But learning quickly how to navigate inflation may soon become part of the job description.”

Please continue to check out ECFA resources that we hope will bolster the stewardship work of our member churches and ministries navigating this challenging financial environment.

This text is provided with the understanding that ECFA is not rendering legal, accounting, or other professional advice or service. Professional advice on specific issues should be sought from an accountant, lawyer, or other professional.