The consumer price index (CPI) is up 0.9 percent in June and 5.4 percent over the last 12 months, marking the highest increases since August 2008, according to the Tuesday (July 13) report from the U.S. Bureau of Labor Statistics (BLS).
Core CPI — which excludes food and energy — was up 4.5 percent from June of last year, the biggest 12-month increase since the end of November 1991. The used vehicles category saw a price surge of 10.5 percent, comprising over one-third of the CPI increase. Hotel bookings, truck car rentals, and airfare also saw increases as the economy reopens post-pandemic.
The food index went up 0.8 percent in June, compared to a 0.4-percent hike in May. The energy index increased 1.5 percent in June and is up 24.5 percent over the last 12-months. The gasoline index rose 2.5 percent over the month before and the food index increased 2.4 percent, according to the report.
The index for medical care and for household furnishings and operations went down in June, among the few categories to see indexes drop.
Richard F. Moody, chief economist at Regions Financial Corp., told The Wall Street Journal (WSJ) that increased demand for goods and services was a central component of June’s inflation. The rebound of air travel, hotel bookings, recreation and entertainment was also a reason for the surge, Moody added.
“Demand is coming back very rapidly, and businesses are normalizing prices in the sense that they are making up for declines” from the initial part of the COVID-19 pandemic Moody told WSJ.
Economists surveyed by WSJ this month estimated that annual inflation, measured by the CPI, will decline to 4.1 percent in December. Per WSJ, a survey by the National Federation of Independent Business showed that 47 percent of small business respondents said they raised prices in May, the most since 1981.
The increase in consumer demand combined with supply chain snags has caused a spike in inflation, which in turn has caused a further hike in prices for goods and services. Fitch Ratings said at the end of last month that core inflation was expected to go up in the months ahead as supply chain tangles continue and consumer demand stays high. Core inflation surged to 3.8 percent year over year in May, the most since the early 1990s.