Inflation rose 9.1% in June, even more than expected, as price pressures intensify

According to a study released on Wednesday by the Bureau of Labor Statistics, consumers paid significantly higher prices in June for a wide range of commodities as inflation continued to hold its ground against a faltering US economy.

The consumer price index, a comprehensive measurement of prices for goods and services used in daily life, increased by 9.1% from a year earlier, exceeding the Dow Jones forecast of 8.8%. Since December 1981, that month saw the highest rate of inflation on record.

So-called core CPI rose 5.9 percent as opposed to the estimated 5.7 percent, excluding volatile food and energy prices.

In comparison to the respective predictions of 1.1 percent and 0.5 percent, the headline and core CPI increased by 1.3 and 0.7 percent, respectively, on a monthly basis.

Together, the data appeared to refute the idea that inflation may be at its pinnacle because the gains were based on a variety of categories. 

“CPI delivered another shock, and as painful as June’s higher number is, equally as bad is the broadening sources of inflation,” said Robert Frick, corporate economist at Navy Federal Credit Union. “Though CPI’s spike is led by energy and food prices, which are largely global problems, prices continue to mount for domestic goods and services, from shelter to autos to apparel.”

Considering everything is going up

Prices for energy rose 41.6 percent in a year and 7.5 percent in a single month. Housing costs, which make up roughly one-third of the CPI, increased by 5.6 percent annually and 0.6 percent for the month, while the food index increased by 1 percent. For the sixth straight month, domestic food prices rose.

Rent rose by 0.8 percent in June, the largest monthly gain since April 1986, according to the BLS.

Government bond yields increased and stock market futures decreased after the report's release.

A significant factor in the increase in inflation was the price of gasoline, which increased by 11.2 percent for the month and by just under 60 percent from the previous year. The cost of power climbed by 13.7% and 1.7%, respectively.

The greatest monthly change ever recorded for that sector in statistics dating back to 1995, dental services jumped by 1.9 percent, driving a 0.7 percent increase in medical care expenditures for the month.

One of the few industries that saw a decrease in June was airline fares, which were still up 34.1 percent from a year earlier despite the 1.8 percent drop. The category for meat, poultry, fish, and eggs similarly experienced a monthly decline of 0.4 percent but an annual increase of 11.7 percent.

For customers who have been struggling with skyrocketing prices for everything from used automobiles to bacon and eggs to airline tickets, the rises represented another challenging month.

Even lower real earnings

According to a second BLS report, inflation-adjusted wages based on average hourly earnings declined 1% for the month and are down 3.6% from a year ago, which meant that for workers, the data meant yet another knock to their wallets.

A number of factors, including clogged supply chains, an excessive preference for goods over services, and trillions of dollars in Covid-related stimulus spending, which has left consumers flush with cash and forced them to pay the highest prices since the early Reagan years, have made it difficult for policymakers to find solutions.

The benchmark short-term borrowing costs have increased by 1.5 percentage points as a result of a series of interest rate rises implemented by Federal Reserve authorities. The primary bank is closer to its 2% longer-run target rate.

The Fed may become even more assertive in response to the inflation reading.

Traders increased their wagers on how quickly interest rates will rise in the future. According to the CME Group's FedWatch tool, a full percentage point shift now has a 37 percent chance of occurring during the meeting on July 26–27, even though a 0.75 percentage point raise is still seen as the most likely outcome.

Although inflation was already sharply rising before the attack in February, White House officials have attributed the increase in prices on Russia's invasion of Ukraine. Joe Biden, the vice president, has urged gas station owners to cut their pricing.

The government and top Democrats have also accused firms of being “greedy” for exploiting the outbreak as a reason to boost costs. However, corporate profits have increased just 1.3% in aggregate since the second quarter of 2021, when inflation took hold.

There are several grounds to believe that the July inflation figures will decline.

According to Energy Information Administration data, gas prices have decreased since their June peak, with a gallon of normal costing $4.64, a 4.7 percent decrease for the month.

A comprehensive indicator of pricing for many different goods, the S&P GSCI commodities index, has dropped 7.3 percent in July but is still up 17.2 percent for the year. That has occurred as wheat futures have down 8% since July 1 while soybeans have dropped 6% and corn has dropped 6.6 % in the same time frame.