Inflation continued to surge in June, with consumer prices accelerating at the fastest pace in almost 13 years as the economy emerges from the pandemic, the feds said Tuesday.
The Labor Department’s Consumer Price Index, which measures a basket of goods and services as well as energy and food costs, jumped 5.4 percent in June from a year earlier.
That’s higher than May’s 5 percent year-over-year rise in prices, and the biggest 12-month rise since August 2008, just before the financial crisis sent the US into the worst recession it had seen since the Great Depression.
Economists surveyed by Dow Jones expected a 5 percent spike in June.
Compared with two years ago, the overall consumer price index was 3 percent higher in June.
Consumer prices rose 0.9 percent from the month prior, the Labor Department said.
The core consumer price index, which excludes volatile food and energy costs, rose 4.5 percent from a year ago, the fastest acceleration since 1991.
Much of the price increases this spring came from sectors that were hit particularly hard by the pandemic and subsequent shutdowns, including used car prices, air fares and fuel costs.
That trend held last month, as used car and truck prices jumped a striking 10.5 percent from May, accounting for more than one-third of the price index’s gains.
From a year ago, used car and truck prices have now spiked 45.2 percent, the data shows.
Airline fares rose 2.7 percent from May and are now up 24.6 percent from last summer, when the pandemic had largely shuttered air travel.
Food prices were also up, 0.8 percent higher than the month prior, according to the data, and 2.4 percent higher than a year ago.
Meats led the way higher in the food index, with beef steaks and pork chops up 6 percent and 5 percent, respectively, from a month prior. The price of eggs also rose 3 percent from the month prior.
The price of eating out rose 0.7 percent last month — a whopping pace not seen since 1981, according to Axios. A major reason was eateries paying more to staff up for an economic rebound and then passing along the costs.
Snack vending machines also saw their biggest single-month cost jump on record.Â
Energy prices rose substantially, too, up 1.5 percent from a month prior and now 24.5 percent higher than a year ago. Gasoline, specifically, rose 2.5 percent from May and is now up more than 45 percent from a year ago.
Notably, housing and shelter prices continue to climb, bolstering the argument that inflation could stick around for longer than the summer. Shelter, which makes up nearly one-third of the overall price index, increased 0.5 percent for the month and 2.6 percent from 12 months ago.
One driver of the massive annual gain in prices is very low inflation this time last year, when the pandemic gutted the economy and consumers were staying indoors and spending less. That could distort year-over-year comparison as the economy reopens, according to Cliff Hodge, CIO for Cornerstone Wealth.
“June 2020 was the absolute low for Core CPI during the pandemic shutdown, so the comparisons get tougher from here. Used car prices soared 45% year over year which is not likely to persist in coming months,” he noted.
Year-over-year comparisons aside, prices are spiking throughout the economy for a variety of reasons, including supply-chain bottlenecks as the economy rapidly reopens from the pandemic.
A labor shortage that’s preventing many businesses from fully reopening as well as subsequent wage hikes to attract new workers is also driving up some costs.
Many companies are now passing those costs on to consumers, sending the price for new houses, food — and more — upward.
Federal Reserve officials have so far maintained their position that inflation is mostly temporary and will likely subside this year. They’ve cited this as a reason why they haven’t yet pulled back on their economic support measures like the stock-buying program.
Peter Essele, head of investment management for Commonwealth Financial Network, said Tuesday’s CPI report might cause Fed officials to reconsider.
“While previous releases mostly showed price increases in a few energy-related areas, it appears the June increase was more broad-based in nature with spillover into the core components of CPI, notably the services component,” he said. “Market participants will be waiting to hear if Powell will hold on to his ‘transitory’ position on inflation, or whether he sees recent price moves as more of a permanent fixture in the months and years to come.”
Jamie Cox, managing partner for Harris Financial Group, however, maintained that Tuesday’s data bolsters the argument that inflation is temporary.
“The headline CPI numbers have shock value, for sure; however, once you realize that a third of the increase is used car prices, the transitory picture becomes more clear,” he said. “Inflation is rising, but things are well behaved and have not changed materially.”
