In June, prices were significantly higher for many goods as the U.S. economy slowed and inflation held its ground. Bureau of Labor Statistics reported Wednesday.
Consumer price index is a measure of the everyday cost of goods and services. It rose 9.1% over a year earlier, exceeding the Dow Jones 8.8% estimate. The fastest rate of inflation since November 1981 was at this point.
The core CPI rose 5.9% to 5.7%, leaving out volatile foods and energy prices. Core inflation peaked in March at 6.5% and has continued to decline since.
Monthly headline CPI increased 1.3%, while core CPI rose 0.7%. This compares to the respective estimates of 0.5% and 1.1%.
Together, these numbers appear to be countering the narrative inflation may be peakingBecause the gains could be attributed to a number of different categories,
Robert Frick of Navy Federal Credit Union, corporate economist said that CPI had delivered another shock. Although June’s number was more alarming, the increasing sources of inflation are equally devastating. CPI’s rise is due to rising food and energy prices. But prices have continued to climb for domestic goods, such as shelter and autos.
Inflation readings could force the Federal Reserve to take a more aggressive stance.
Traders increased their expectations about the rate of future interest rate rises. A full percentage point increase is possible for the July 26/27 meeting according to CME Group’s FedWatch tool at 10:40 am. ET.
Although the U.S. has an inflation rate above 9% it is not the extent of price increases that are really worrying for the Federal Reserve. James Knightley was ING’s chief global economist. The Fed must use higher rates to ensure that demand is matched with supply, as supply conditions are not improving. There is a growing recession threat.”
Higher across all boards
The month saw energy prices rise 7.5% and then increase 41.6% over a 12-month period. Food prices increased by 1% while shelter costs rose 0.6%, or 5.6% per year, and accounted for about one third of CPI. It was the sixth consecutive month in which food at home increased at least 1.
The BLS reported that rental prices rose by 0.8% in June. This is the biggest monthly increase since April 1986.
Stocks mostly slumpedFollowing the data as government bond yields surged
The main reason for inflation was the rise in gasoline prices. They increased by 11.2% per month, and only a little over 60% during the 12-month period. The prices of electricity rose by 1.7% and 13.7% respectively. Prices of new and used cars posted monthly increases of 0.7%, 1.6% respectively.
In the last month of 1995, there was a 1.9% jump in the cost of dental services. It is the highest monthly increase for this sector.
The only area that saw a decrease in airline fares was June. They fell 1.8%, but were still up 34.1% compared to a year earlier. Also, meat, poultry, eggs, and fish fell 0.4% in June but rose 11.7% year-over-year.
Consumers have suffered through rising prices for everything from used cars and airline tickets to bacon, eggs, and even eggs for the past month.
Further, real incomes are falling
According to separate BLS releases, workers saw another pinch as their inflation-adjusted earnings fell by 1% and 3.6% respectively from one year earlier.
Politicians have had difficulty coming up with a solution to this situation. It is caused by multiple factors including congestion in supply chains, a high demand for goods and services, as well as trillions in dollars. CovidConsumers have been left with little to no choice but to spend their money on stimulus.
Federal Reserve officials created a series of interest rate increasesThat has pushed benchmark short-term borrowing prices up 1.5 percentage points. It is anticipated that the central bank will continue to hike until inflation approaches its 2% long-run target rate.
White House officials blame the price rise on Russia’s invasion of UkraineAlthough inflation had been rising steadily before the February attack, it was still a significant increase. President Joe Bidenurged gas station owners and operators to reduce their prices.
Leading Democrats and the administration also blame greedy corporations, which they claim used the pandemic to increase prices. Since the inflation started in the second quarter, corporate after-tax profits have increased by 1.3%.
Biden made a statement after the publication and stated, “Tackling inflation is my highest priority.” He reiterated his previous demands that oil companies lower their prices and Congress vote on legislation that will decrease costs of different products and services.
The July inflation numbers may cool, there are some reasons to believe.
The June peak for gasoline prices was $4.64. That’s a 4.7% decline in monthly gasoline prices, according to Energy Information Administration data.
The S&P GSCI commodities index, a broad-based measure of prices for multiple goods, has fallen 7.3% in July, though it remains up 17.2% for the year. Wheat futures have dropped 8.8% in July, soybeans down 6%, and corn 6.6% over the same time period.
The trucking industry from a perspective
Brian Antonellis (senior vice president fleet operations, Fleet Advantage), a Florida-based leasing and asset management company, said, “I see light at the end”
Antonellis believes that the industry will see a gradual increase in production, which would help to improve the competitiveness of an industry already struggling with rising fuel costs, tight labor markets, and supply chain problems that hindered the delivery of products.
The industry was in a steady state for 10-15 years prior to the pandemic. Costs rose across the board at a rate of 1 to 3 percentage points per year. “It was very easy to budget and forecast. It was also easy to add rates to it.” he stated. The challenge that we have today is not 1-3% anymore. It’s 10-20% depending on the cost category.
However, he stated that trucking companies can still get by with creative financing and pricing power.
Antonellis stated that people are honest and don’t try to charge too much. They’re not trying to be predatory. However, they do want to keep that line of sight. How can we move forward? “How can we see the cost coming in?”
He acknowledged that, with the U.S. economy becoming increasingly uncertain, the sector is not “recession proof.”
Antonellis stated that there will be “challenges”. I don’t believe it is all negative. For the next six month, I think there will still be problems. However, I believe we are on the upswing.”
Correction: CPI growth in June was the highest since November 1981. In an earlier version, the month had been misrepresented.. Core CPI was estimated at 5.7%. A previous version of this article misstated this percentage.