The Consumer Price Index (CPI) rose 0.9% in June and 5.4% in the past 12 months, marking the largest increases since August 2008, according to the Tuesday July 13 report of the US Bureau of Labor Statistics (BLS).
The core CPI – which excludes food and energy – rose 4.5% from June of last year, the largest 12-month increase since late November 1991. The vehicle category d opportunity saw a price spike of 10.5%, including the CPI increases. Hotel reservations, truck rentals and plane tickets have also increased as the economy reopens after the pandemic.
The food index rose 0.8 percent in June, compared to a 0.4 percent increase in May. The energy index rose 1.5% in June and is up 24.5% in the past 12 months. The gasoline index rose 2.5 percent over the previous month and the food index rose 2.4 percent, according to the report.
The medical care and furniture and household operations index fell in June, among the few categories to have seen a decline.
Richard F. Moody, chief economist at Regions Financial Corp., told the Wall Street Journal (WSJ) that rising demand for goods and services was a central component of June inflation. A rebound in air travel, hotel reservations, and leisure and entertainment was also a reason for the rise, Moody added.
“Demand is coming back very quickly and companies are normalizing prices in the sense that they are offsetting the declines” in the first part of the COVID-19 pandemic, Moody told the WSJ.
Economists polled by the WSJ this month estimated that annual inflation, as measured by the CPI, will decline to 4.1% in December. According to the WSJ, a survey by the National Federation of Independent Businesses showed that 47% of small businesses surveyed said they had raised their prices in May, the highest number since 1981.
The increase in consumer demand combined with supply chain problems has caused a surge in inflation, which in turn has caused a further rise in the prices of goods and services. Fitch Ratings said late last month that core inflation is expected to rise in the coming months as supply chain entanglements continue and consumer demand remains high. Core inflation jumped to 3.8% year-on-year in May, the highest since the early 1990s.