Consumer Price Index jumped +0.9% in June. Prices jumped +5.4% in June.
Key Inflationary Measure Jumped Sharply in June
The US Labor Department said that the Consumer Price Index (CPI) climbed +5.4% in 2021 through June. This year-to-date CPI change of 5.4% surpassed May’s 5% increase and registered as the largest year-over-year gain since 2008.
Increasing prices for used cars and trucks represented more than 33% of this surge. (Prices for used cars/trucks jumped +10.5% in June.)
Policymakers Have Bet Inflationary Prices to Subside
Policymakers at large and officials at the Federal Reserve specifically have expected inflation/prices to go up as the pandemic economy reopens BUT prices have climbed faster than anticipated. And with those rising prices, consumers’ expectations about inflation have also risen. Such expectations could make inflation a self-fulfilling prophecy.
According to The New York Times, when “…households begin to expect rapid price gains year after year, they might both accept higher price tags and demand higher pay to cover rising costs. That could make today’s faster inflation – which officials expect to prove temporary – permanent.”
Other Data Points Suggest Quick Price Gains May Be Longer Lasting
In a recent survey on consumers expectations done by the New York Fed, spending growth expectations jumped to a new high. To substantiate those higher expectations, apartment rents rebounded above pre-pandemic levels to the tune of +9.2% in the first half of 2021, according to ApartmentList. Overseas manufacturing disruptions and shipping problems may last for months. And wages are increasing for lower-paid workers which could translated into higher prices for restaurant meals and other services.
Hotel prices jumped +7.9% as demand for vacations soared. And, food overall cost +0.8% in June compared to May’s food costs.
On the other hand, some of June’s CPI high of 5.4% could be explained by “base effects,” prices that were unusually low last summer due to the pandemic so that this year’s price increases look unusually high.
Another contra-indicator of longer term inflation is the price of lumber. According to Bloomberg, lumber has officially wiped out its staggering gains as prices are now down -0.6% for the year. We’ll see what happens to those prices in September when wood prices often drift higher.
Thanks to The New York Times and Bloomberg.
