Rising fuel, housing and food costs contributed significantly to high inflation last month
The annual rate inflation of the US rose to 9,1 percent in June, hitting the highest level since November 1981 and beating the market estimate of 8,8 percent and May's annual rate of 8,6 percent.
In accordance with Bureau of Labor Statistics ( BLS ), the consumer price index (CPI) rose 1,3 percent month-over-month. Monthly inflation was also higher than economists' expectations of 1,1%.
While core inflation, which strips out the volatile food and energy sectors, fell to 5,9%, this was higher than the forecast of 5,7%. On a monthly basis, core inflation rose at a higher than expected rate of 0,7%.
Food prices increased by 10,4%, while the energy index increased by 41,6%.
Almost every food item, apart from raw beef steak, was more expensive last month. Pork increased by 9%, chicken increased by 18,6% and ham by 9,6%. Eggs increased by 33,1%, milk increased by 16,4%, fruits and vegetables increased by 8,1% and coffee swelled by 15,8%.
In the energy sector, fuel oil increased by 98,5%. Gasoline increased by 59,9%, electricity costs increased by 13,7%, and propane and kerosene increased by 26,1%.
New vehicles were up 11,4%, used cars and trucks were up 7,1%, clothing was up 5,2% and lodging was up 5,6%.
Housing costs, which make up about a third of the CPI, rose 0,6% in June from May. This was mainly due to a 0,8% increase in primary residence rent, the largest rent increase since 1986.
"Today's shockingly high consumer price inflation number does not bode well for our country's economic outlook," Desmond Lachman, an economist and senior fellow at the American Enterprise Institute, said in an email to The Epoch Times.
It makes it likely that the Fed will continue to raise interest rates and aggressively reduce its "bloated balance sheet," he said.
"The Fed will likely do so despite growing signs of economic and financial market weakness both at home and abroad," Lachman said. "This should raise the risk of an economic hard landing before the end of the year and further turmoil in equity and bond markets."
The S&P 500 closed down 0,4%, its fourth straight decline, after falling as much as 1,6% earlier. The Dow Jones Industrial Average fell 0,7%, while the Nasdaq Composite closed down 0,2%, erasing almost all of an early 2,1% loss.
The U.S. dollar index ( DXY ), which measures the greenback against a basket of currencies, jumped on the news before ending the day 0,13% lower at 108,02. The index edged lower in 2022, rallying about 13 percent year-to-date.
A fake CPI report was released online on July 12 and attempted to mimic the formatting of May's inflation data, using different dates and numbers. It claimed annual inflation was 10,2 percent in June. Despite being fake, it caught the attention of investors, sending stocks slightly lower in the afternoon session on Wall Street.
Peak inflation?
Last month, crude oil and gasoline prices fell sharply amid growing recession fears and a weaker demand outlook.
West Texas Intermediate (WTI) crude oil has fallen about 17 percent below $100 a barrel on the New York Mercantile Exchange since mid-July. The national average for a gallon of gas has fallen about 7 percent to about $4,65, according to AAA.
Agricultural commodities have also fallen, with corn, wheat and soybeans down about 20 percent in the past month.
"Easing food, energy and commodity prices, improving supply chains, easing shipping costs and lower purchasing managers' indices suggest that US inflation may have peaked last month or will soon at the highest level," said Ipek Ozkardeskaya, a senior official. analyst at Swissquote Bank, wrote in a research note.
Even though inflation has peaked, market experts believe that prices for many goods and services in the market will remain high, such as rent and airline tickets. Core CPI could also moderate, due to lower used car prices.
The headline inflation measure prompted the interest rate futures market to revise its expectations that the Federal Reserve will raise interest rates by 100 basis points at this month's Federal Open Market Committee (FOMC) meeting. Most of the market had forecast a three-quarter hike at the upcoming rate-setting committee meeting, with little chance of a full point hike, according to the CME FedWatch Tool.
Price stability has become the central bank's primary goal, even if it sparks a recession and extends the selloff in financial markets. Fed Chairman Jerome Powell said it was possible to navigate a soft landing, but noted it was not a guarantee.
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