United States: Inflation rises to a near thirteen year high in June
Consumer prices rose a seasonally-adjusted 0.90% in June over the previous month, picking up from the 0.64% rise recorded in May. June’s uptick was the sharpest increase in prices since June 2008. Looking at the details of the release, prices for housing increased in June, while prices for transportation and food also grew robustly.
Inflation came in at 5.4% in June, which was up from May’s 5.0%. June’s figure was the highest inflation rate since July 2008. Annual average inflation rose to 2.3% in June (May: 1.9%). Lastly, core inflation rose to 4.5% in June, from the previous month’s 3.8%.
Heightened inflation figures in recent months have been driven by a combination of government stimulus, an easing Covid-19 pandemic, higher commodity prices, the semiconductor shortage affecting car production, high domestic travel demand and a favorable base effect. Looking forward, our panelists see price pressures ebbing as some transient drivers fade and the base effect grows less favorable, but inflation will remain above-target this year nonetheless.
Commenting on inflationary pressures ahead, Leslie Preston, a senior economist at TD Economics, noted:
“Even as some of these swings are transitory, measures that are not as affected by the pandemic are also seeing sturdy price gains. Eventually the Federal Reserve will have to take notice, but the other side of the dual mandate – full employment – has been a bit disappointing lately, suggesting it will be some time still before they raise the federal funds rate.