Inflation Jumps 1.3% In June, Up 9.1% Over Last Year; Gasoline, Shelter, Food Biggest Contributors

The Consumer Price Index increased 1.3% in June on a seasonally adjusted basis, after rising 1% percent in May, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the-all items index surged 9.1% — the largest 12-month increase since November of 1981. Gasoline prices were up nearly 60%.

The June CPI number was higher than an anticipated 1.1% monthly and 8.8% annually, meaning the U.S. Federal Reserve will likely continue hiking interest rates at its July and September meetings to tame demand and get inflation under control. Stocks were lower in early trading with the Dow Futures down more than 300 points before market open.

Consumer and companies alike are feeling the pinch. Media and entertainment execs have noted rising inflation in recent months, economic woes have pummeled stocks and are sure to be front and center in showbiz corporate earnings and commentary starting next week. Exchange rates are an issue too with the euro plunging in value against the dollar.

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Price increases were broad based, but gas, shelter and food were the largest contributors. The energy index rose 7.5% over the month and contributed nearly half of the all-items increase. The gasoline index rose 11.2%.

The index for all items less food and energy rose 0.7% percent in June, after increasing 0.6% in the preceding two months. Shelter, medical insurance, new and used cars and trucks, motor vehicle insurance, and new vehicles rose, as did motor vehicle repair, apparel, household furnishings and recreation. Among the few major component indexes to decline in June were lodging away from home and airline fares.

Price hikes are a political issue. Yesterday, the Biden administration tried get in ahead of the glum numbers with the President’s economic advisers issuing a memo designed to temper public reaction. Wednesday data “will largely not reflect the substantial declines in gas prices we’ve seen since the middle of June,” wrote National Economic Council Director Brian Deese and Cecilia Rouse, chair of Biden’s Council of Economic Advisers providing “context.”

They noted that gasoline prices have already fallen 5% percent from the June average, to around $4.68 a gallon, and are likely to decline in coming weeks if wholesale prices remain at current levels.

Covid-related supply chain disruptions, increased consumer demand and the Russia-Ukraine war all contribute to higher inflation. Many think the Fed should have anticipated the jump and started to raise interest rates earlier.

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