Consumer prices rise 0.9 percent, inflation up 5.4 percent in June
Consumer prices rose 0.9 percent in June, according to data released Tuesday by the Labor Department, heating up from the previous month.
The consumer price index (CPI), a closely watched gauge of inflation, increased to an annualized rate of 5.4 percent last month amid a summer rush of economic activity. Economists expected the CPI to rise by roughly 0.5 in June, according to consensus estimates, after an increase of 0.6 percent in May.
June’s monthly increase in the CPI was the largest recorded since a 1-percent increase in June 2008. The annualized rise in inflation is the highest since another 5.4-percent increase in August 2008.
Inflation has risen steadily this year after plummeting in 2020. Prices for many goods are quickly recovering from pre-pandemic lows while others face upward pressure from supply shortages.
The price index for used cars and trucks skyrocketed by 10.5 percent, making up more than one-third of June’s total increase in inflation.
Used autos have been scarce throughout the pandemic as manufacturing delays and a sharp drop in repossessions prevented more cars and trucks from hitting the resale market. Those that do are often snapped up at high prices by rental car companies, which liquidated their fleets during the onset of the pandemic and have struggled to replace them as travel picks up.
Energy prices also rose 1.5 percent in June as scorching weather and travel pushed up demand, with gasoline prices increasing 2.5 percent. The index for food prices also rose 0.8 percent, doubling May’s increase of 0.4 percent.
Many economists expect inflation to return toward pre-pandemic levels as businesses and suppliers catch up to bursting demand. The CPI rose just 1.4 percent in 2020, well below the Federal Reserve’s annual target of 2 percent, and many prices are still below their pre-pandemic peaks.
But a lack of certainty over when that will occur has been a major political obstacle for President Biden and Democrats.
Republicans have tried to pin rising costs on Biden’s economic agenda, blaming the $1.9 trillion March economic relief bill and trillions more in proposed spending for rising inflation.
GOP lawmakers have claimed that Biden’s proposals would cause the U.S. economy to overheat and create a dizzying inflation spiral akin to the 1970s. With an eye toward the 2022 midterm elections, Republicans have also pointed to rising gas prices in an effort to paint Biden in the image of former President Carter.
Biden and the Federal Reserve, however, have argued that inflation would settle down before long before it becomes a threat to the economy. While inflation has run higher than some had expected, they argue that much of it appears to be caused by short-term factors, not deeper economic issues.
Fed Chair Jerome Powell and other central bank leaders have expressed confidence in their grasp on inflation, insisting that they will be able to cool off prices if they begin to rise too quickly
Updated at 8:52 a.m.