Inflation sped up faster than expected again in June, with jumps in the price of food, gas, and hotel rooms making that summer trip more expensive than you might have anticipated.
Inflation as measured by the Consumer Price Index (CPI) increased 5.4% on a year-over-year basis last month, up from 5.0% in May, according to data released Tuesday by the Bureau of Labor Statistics. The core inflation rate—which excludes prices for food and energy that tend to be more volatile—rose to 4.5%, from 3.8% in May, and hasn’t been this high in nearly 30 years.
Part of the sharp rise in inflation is due to the fact that the economic crash last spring made the baseline for comparison with this year unusually low. Month over month, the CPI rose 0.9% in June, almost twice as fast as economists projected and the largest one-month increase since 2008.
Prices for used cars and trucks drove more than a third of the increase, rising 10.5% in June, the largest month-to-month jump in 68 years of data. Travel-related items like hotels (7.9%), rental cars (5.2%), and gasoline (2.5%) cost consumers more last month, too, as did food (0.8%) and apparel (0.7%).
Rising prices reflect the economy’s growing pains as it restarts following the pandemic. Consumers have a huge demand for goods and services at the same time that a shortage of workers and materials limits how quickly businesses can adjust to the pace of the economy’s reopening. To compensate, businesses have started to pass rising labor and supply costs on to their customers. In the last three months, 47% of small businesses have hiked their prices, according to a survey released Tuesday by the National Federation of Independent Business, with 44% saying they plan increases in the next three months. Both levels are higher than they’ve been in at least 40 years.
Inflation has grown faster than expected throughout the spring, and could remain above the Federal Reserve’s traditional 2% target going forward. But Fed officials have said they believe temporary factors are pushing inflation higher, and June’s inflation numbers likely aren’t enough to change the Fed’s mind about that, economists said. The central bank continues to aim for inflation that’s “moderately above” its 2% target to allow the economy to rebuild.
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