U.S. Consumer Inflation Soars to Another 40 Year High 9.1% as Food and Energy Prices Soar

US consumer inflation hit +9.1% y/y vs +8.6% expected. Prices for energy jumped 41.6% from a year earlier, the most since April of 1980 and food prices jumped 10.4%, the largest 12-month increase since February of 1981. Shelter costs also accelerated higher. Real Earnings are declining at a rapid rate. CPI in June rose m/m +1.3% vs +1.1% expected and +1.0% prior expected. Core CPI rose 0.7% (consensus +0.6%).

Inflation

US interest rate Futures after the report are pricing in a 22% Chance Of 100Bps Hike at the July Meeting, 79% for 75Bps.

The bond and stock markets began selling off on inflation fears yesterday. 10-year yields rising over 3%.

Increases in the cost of food, electricity and shelter were the largest contributors again to the monthly rise, the Labor Department said

“Economists like to strip food and energy out of their inflation calculations. They’re too volatile to be meaningful, they say. But for everyday Americans coping with exploding prices, those items are pretty much all they care about right now. For two straight months, the primary consumer expenses — fuel, power, and grocery-store food — have all been rising at double-digit annual rates for the first time since 1981.” June 9 – Bloomberg (Olivia Rockeman, Will Wade and Michael Hirtzer):

US June 2022 Highlights

CPI

  • US CPI (Y/Y) Jun: 9.1% (est 8.8%; prev 8.6%)
  • US CPI (M/M) Jun: 1.3% (est 1.1%; prev 1.0%)

Real Earnings

  • US Real Avg Hourly Earning (Y/Y) Jun: -3.6% (prevR -2.9%)
  • US Real Avg Weekly Earning (Y/Y) Jun: -4.4% (prevR -4.0%)
US Real Earnings via @LizAnnSonders

Many analysts had expected March, clearly, they have been mistaken to mark the inflation peak although the war in Ukraine is far from over, supply chain bottlenecks persist, and consumer demand remains elevated which is likely to weigh on the CPI.

Core inflation:

  • US CPI Ex Food and Energy (Y/Y) Jun: 5.9% (est 5.7%; prev 6.0%)
  • US CPI Ex Food and Energy (M/M) Jun: 0.7% (est 0.5%; prev 0.6%)

All items less food and energy index rose 5.9 percent over the last 12 months. The energy index rose 41.6 percent over the last year, the largest 12-month increase since the period ending April 1980. The food index increased 10.4 percent for the 12-months ending June, the largest 12-month increase since the period ending February 1981. 

“Spot commodity prices surged to a fresh record high as energy and food supplies continue to be roiled by the war in Ukraine, while China rolls back demand-curbing Covid-19 lockdowns. The Bloomberg Commodity Spot Index, which tracks prices for 23 raw materials, rose 1.9% Monday to its highest-ever level. The move was mostly driven by a jump in futures contracts for natural gas and wheat amid renewed supply fears. The gauge has climbed 36% this year, heading for the biggest annual advance in more than a decade.” June 6 – Bloomberg (Gerson Freitas Jr.)

Yearly Price Increases

  • Energy cost rose 41.6%, the most since April of 1980 and food prices jumped 10.4%, the largest 12-month increase since February of 1981.
  • Compared to May, consumer prices were up 1.3%, with the indexes for gasoline, shelter, and food being the largest contributors.
  • Core inflation which excludes food and energy increased 5.9%, slightly below 6% in May, but above forecasts of 5.7%.

The hope was the slowdown in April was a sign that inflation had probably peaked, the inflation is unlikely to fall to pre-pandemic levels any time soon and will remain above the Fed’s 2% target for a long time as supply disruptions persist and energy and food prices remain elevated.

US CPI Inflation – where it is

US CPI June 2022

United States Consumer Price Index (CPI)

 

United States Inflation Rate

Core Inflation y/y

United States Core Inflation Rate

Food

United States Food Inflation

Food inflation in the United States accelerated for a 13th straight month to 10.4% in June of 2022, the biggest increase since February of 1981. The food at home index rose 12.2%, the largest 12-month increase since the period ending April 1979. All six major grocery store food group indexes increased over the span, with five of the six rising more than 10%. The index for food away from home rose 7.7%, the most since November 1981

Housing Utilities

United States CPI Housing

Transportation

United States CPI Transportation

US Core CPI June 2022

United States Core Consumer Prices

 

The effects of the coronavirus pandemic, then the supply crisis and throw in the Russian invasion of Ukraine on top have been weighing on prices. Since last year many businesses closed and lockdowns were imposed, denting economic activity leaving the world vulnerable.  A jump in commodities and material costs, coupled with supply constraints, are pushing producer prices up and some companies are passing those costs to clients

June 6 – CNBC (Lorie Konish): “Social Security beneficiaries saw the biggest cost-of-living adjustment in about 40 years in 2022, when they received a 5.9% boost to their monthly checks. Next year, that annual adjustment may even go as high as 8%, according to early estimates… An 8% COLA would be the highest increase in years, according to Social Security Administration data. The last time the federal agency announced a bigger annual bump was in 1981, when there was an 11.2% increase.” 

“I’m making more money…But I don’t see it because I’m paying more money for stuff now.” Low-wage workers are getting sharp raises. Inflation is eating them up. via Greg Ip WSJ

 Source: BLS

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