The Consumer Price Index jumped over 9.0% for the first time in over 40 years, according to the Bureau of Labor Statistics…(BLS)
- Y-O-Y: The Consumer Price Index for All Urban Consumers increased to 9.1% when compared to prices in June of 2021.
- M-O-M: Consumer prices were up 1.3% when compared to the prior month.
NOTE: Economists had projected a smaller year-over-year increase of 8.8% and a smaller monthly increase of 0.6%.
One silver lining in the report was core CPI falling slightly to 5.9% but even that was disappointing because it was a smaller drop than the 0.3 percentage point drop that economists had projected.
Food prices continued their climb with overall food costs now up 10.4% year-over-year thanks to a 1.0% monthly increase in June, this was up from the 10.1% reported in May.
- Cereal and bakery products took the top spot this month with prices up 13.8% year-over-year. Dairy products were a close second up 13.5% followed by nonalcoholic beverages (+11.9%) and meat, poultry, fish, & eggs (+11.7%).
- The spread continues to widen between groceries and eating out with the former up 12.2% year-over-year while the latter is up only 7.7%.
Even though oil prices began falling at the end of the month, there is no evidence of that in this report with energy prices up 41.6% year-over-year thanks to a 7.5% monthly increase. This was the second biggest monthly jump this year.
- Gasoline prices were up 11.2% for the month and now 59.9% year-over-year.
- Electricity costs were up 1.7% in June and are now up 13.7% year-over-year.
Shelter costs continue their slow and steady rise with prices up 5.6% year-over-year thanks to a 0.6% monthly rise, this was the second month in a row that prices rose 0.6% for the month.
- Rents saw more upward pressure in June with year-over-year rent of primary residence up 5.8% because of a 0.8% monthly increase.
- Homeowner rent equivalent was up 5.5% for the year and was up 0.7% month-over-month.
The analysis was, well, not good. As concerning as prices were it was their relation to wages that had everyone buzzing…
- Ben Casselman of the New York Times: “Stepping back to look at the big picture here, the strong labor market is leading to wage gains, but those raises are getting completely wiped out by inflation. Average hourly earnings down 3.6% over the past year, adjusted for inflation (-3.1% for non-supervisors).
- Jason Furman of Harvard: “The decline in real average hourly earnings at this point is terrible, the fastest pace of decline in 40 years.”
Ouch. There was misplaced optimism heading into the CPI this month. This month’s increase was broad-based, with the indexes for gasoline, shelter, and food being the largest contributors. While core CPI did fall it was less than expected and hardly something to get excited about. Gas prices have fallen for 28 days in a row which will put some downward pressure on energy costs but that will most likely be offset by a steady rise in shelter costs. Last week’s jobs report may have confused the Fed about whether staying the course was the right move, this should end the debate pretty quickly. The CME Group’s Fed watch now has a 100 basis point hike at 50% which just one week ago was at 0%…