According to data from the Bureau of Labor Statistics (BLS), inflation was up 1.3% in June and 9.1% annually, the highest level of annual inflation since 1981. June’s 9.1% yearly inflation beat mainstream expert predictions, such as the Dow Jones estimate of 8.8%. While many hoped that the U.S. inflation picture would improve, the latest numbers indicate that inflation is only worsening, with a high 1.3% increase in consumer pricing in June alone.
Gas Prices Increase the Most, but Inflation Hits Everywhere
Gasoline, shelter, and food contributed the most to June’s high inflation, with gas and energy the highest contributor. Energy prices rose 7.5 percent in June and are up a staggering 41.6% annually, while gasoline by itself rose 11.2 percent during the latest month. Food prices rose 1.0 percent in June and 10.4% annually.
The BLS puts all items other than food and energy into one broad category called the “items less food and energy index.” That index rose 0.7% in June and 5.9% annually, with the most prominent monthly contributors including used and new cars and medical care.
Very few services or goods experienced negative inflation in June, but lodging and airline fares bucked the trend and experienced declining prices during the month.
Robert frick, corporate economist at Navy Federal Credit Union, told CNBC that the broad-based nature of June’s inflation is worrying. “CPI delivered another shock, and as painful as June’s higher number is, equally as bad is the broadening sources of inflation,” Frick said. “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.”
Fortunately, according to AAA, gasoline prices fell a bit during the first couple of weeks of July. As of July 14th, a regular gallon of gas averaged $4.605, compared to $5.016 in June, a substantial 8.2% decline.
Wages Fall Behind
According to the BLS’s June Real Earnings Summary, effective average hourly earnings decreased 1.0 percent from May to June. Hourly wages increased 0.3 percent on average but ultimately fell behind the 1.3% increase in inflation. Annually, effective hourly earnings declined by 3.6% because of rising consumer prices.
Rents Post Their Biggest Monthly Increase Since 1986
The BLS data also revealed that average rents rose 0.8% in June and 5.8% annually. That’s the highest monthly rent increase since 1986, but other rental indexes grew more during last month. In New York City, for instance, RentHop finds that median one-bedroom rent rose 1.83% in June to $3,895.
Moody’s Analytics Chief Economist Mark Zandi told Bloomberg that Labor Department estimates usually lag behind other data, which explains the gap between the official government findings and other rental indices.
“The big increase in CPI rents is catch-up with the consistent double-digit growth in market rents,” Zandi said to Bloomberg. “The good news is that market rents appear to be topping out, as renters are not able to afford the higher rents and are balking. More rental supply is also coming, although this will take a year or two to have a meaningful impact on market rents.”
