US Inflation

2022 - 7 - 13

Post cover — Image courtesy of "ABC News"

US annual inflation rises 9.1 per cent, posting largest increase since ... (ABC News)

US annual consumer prices jumped 9.1 per cent in June, the largest increase in more than four decades, leaving Americans to dig deeper to pay for gasoline, ...

The Dow Jones Industrial Average fell 0.7 per cent, the S&P 500 lost 0.5 per cent, and the Nasdaq Composite dropped 0.2 per cent. The pan-European STOXX 600 index lost 1 per cent and MSCI's gauge of stocks across the globe shed 0.3 per cent. - Overnight, the Dow Jones index lost 0.7 per cent, the S&P 500 dropped 0.5 per cent, and the Nasdaq Composite shed 0.2 per cent This followed the red-hot US inflation reading for June, while a rebound in gold and iron ore prices might offer a boost to miners. The US inflation data followed stronger-than-expected jobs growth in June and suggested that the US central bank's aggressive monetary policy stance had made little progress thus far in cooling demand and bringing inflation down to its 2 per cent target. US annual consumer prices jumped 9.1 per cent in June, the largest increase in more than four decades, leaving Americans to dig deeper to pay for petrol, food, healthcare and rents.

U.S. inflation at 9.1 percent, a record high (PBS NewsHour)

Surging prices for gas, food and rent catapulted U.S. inflation to a new four-decade peak in June, further pressuring households and likely sealing the case ...

It reached 9.1 percent in the United Kingdom in May, the highest level in four decades, driven mostly by higher gas and food prices. With fewer ships stuck at the Port of Los Angeles and Long Beach, America’s largest, shipping costs for international freight have fallen. The central bank is expected to raise its key short-term rate later this month by a hefty three-quarters of a point, as it did last month, with potentially more large rate hikes to follow. Powell has stressed that the central bank wants to see “compelling evidence” that inflation is slowing before it would dial back its rate hikes. With many people priced out of the market for houses and looking instead to rent, demand for apartments has sent rental rates beyond affordable levels. But as consumer spending has gradually shifted away from goods and toward services like vacation travel, restaurants meals, movies, concerts and sporting events, some of the highest price increases have occurred in services. And airline fares, one of the few items to post a price decline in June, are nevertheless up 34 percent from a year earlier. Forty percent of adults said in a June AP-NORC poll that they thought tackling inflation should be a top government priority this year, up from just 14 percent who said so in December. Rents as measured by the government’s inflation index have risen more slowly because they include all rents, including existing leases. The ongoing price increases underscore the brutal impact that inflation has inflicted on many families, with the costs of necessities, in particular, rising much faster than average incomes. In addition, shipping costs and commodity prices have begun to fall. New car prices have increased 11.4 percent from a year earlier.

US inflation accelerates to 9.1 per cent (The Australian Financial Review)

The latest surge will place further cost-of-living pressure on the Biden administration, and ensures another large interest rate rise by the Federal Reserve ...

And surveys show Americans’ expectations for inflation in the long run have eased. Car and truck rental prices have dropped 7 per cent, and are down 19.2 per cent in the last year. The cost of dental services rose 1.9 per cent, the biggest one-month increase since records began, while transport services rose 3.1 per cent in June and are up 10.4 per cent for the year. He stressed it was the first time since last year that the annual core inflation rate was below 6 per cent. Some economists, however, expect inflation to stay high. Oil prices fell on Tuesday to about $US96 a barrel. Connect with Matthew on But the prices that count for households have further climbed. The prices of beer, baby food, chicken and frozen fruit and vegetables had their largest annual gains since records were kept. Rents have risen 5.8 per cent, the most since 1986. Commodity prices are also falling. The price of television sets, for example, fell 4 per cent in June, and TVs are now 13.8 per cent cheaper than a year ago.

Why is US inflation so high – and how long will it last? (The Guardian)

Soaring prices a top concern for many Americans, and likely influencing many voters in a midterm election year.

The unemployment rate has held steady at 3.6% – around the same rate as before the pandemic. A slowdown in investments could have a cascading effect on jobs and spending, though it remains too early to predict any recession – not that that has stopped certain people, and banks, from doing so. The Fed’s control of interest rates is its most powerful tool to curb inflation. At the peak of the crisis, ports were clogged with ships trying to dock, containers were falling into the ocean and there was a shortage of truck drivers. As the demand for goods soared, supply remained constrained – because of the infamous supply chain crisis, which is only just now starting to ease. The Federal Reserve, headed by Jerome Powell, has been aggressive in its response to inflation, raising interest rates twice this year.

US inflation hits 9.1% as pressure grows on Federal Reserve (Financial Times)

Markets price in higher chance of 1% rate rise this month after bigger-than-expected jump in prices.

US inflation jumps 9.1 percent in June to fresh four-decade high (Aljazeera.com)

The rise in the CPI gives the Federal Reserve – the US central bank – free rein to hike interest rates further later this month. A shopper inside a grocery ...

Particularly for groceries, “we suspect more significant easing ahead as raw material, transportation and wage costs have started to cool,” they said in a note. Prices for energy services, which includes electricity and natural gas, increased 3.5%, the most since 2006. Economists have been expecting consumers to rotate their spending from goods to services as Covid-related concerns fade, but goods prices so far are still elevated. Fed policy makers have already signaled a second 75 basis-point hike in interest rates later this month amid persistent inflation as well as still-robust job and wage growth. Even so, recent commentary from US airlines have indicated that travel demand remains strong. The inflation data will keep Fed officials on an aggressive policy course to rein in demand, and adds pressure to President Joe Biden and congressional Democrats whose support has slumped ahead of midterm elections. Even so, the company said volumes have held up well. Retail gas prices topped $5 on average nationwide in June, though they’ve since subsided somewhat. Economists projected a 1.1% rise from May and an 8.8% year-over-year increase, based on the Bloomberg survey medians. Even so, the labor market has held strong, adding nearly 400,000 jobs last month. “Rather than cooling down, inflation is heating up,” Sal Guatieri, senior economist at BMO Capital Markets, said in a note. Several factors such as housing stand to keep price pressures elevated for longer.

Explainer: Why US inflation is so high, and when it may ease (North Bay Business Journal)

Here are answers to common questions about what's causing the rapid rise in consumer prices, how long it will last and how it's impacting households.

When the pandemic paralyzed the economy in the spring of 2020 and lockdowns kicked in, businesses closed or cut hours and consumers stayed home as a health precaution, employers slashed a breathtaking 22 million jobs. And some argued that the Fed kept rates near zero far too long, lending fuel to runaway spending and inflated prices in stocks, homes and other assets. But instead of sinking into a prolonged downturn, the economy staged an unexpectedly rousing recovery, fueled by vast infusions of government aid and emergency intervention by the Fed, which slashed rates among other things. Now, most economists expect inflation to remain painfully elevated well after this year, with demand outstripping supplies in numerous areas of the economy. For months, Powell and some others characterized high inflation as merely a “transitory” phenomenon while the economy rebounded from the pandemic recession faster than anyone had anticipated. So the Fed has radically changed course by imposing a succession of large rate hikes. And on and on it went: 7.5% in January, 7.9% in February. And the increases have topped 8% every month since March. The United States has endured worse inflation before, but not in many decades. The inflation of the 1970s and early 1980s peaked at 14.8% in March 1980 before the Fed exorcized high prices with aggressive rate hikes that caused brutal back-to-back recessions in 1980 and 1981-1982. Unleaded gasoline is up 61% in the past year. In February 2021, the consumer price index was running just 1.7% above its level a year earlier. Consumers have endured the pain in everyday routines.

Why the U.S. inflation surge is accelerating, and when it may ease (PBS NewsHour)

Inflation's relentless surge didn't merely persist in June. It accelerated. For the 12 months ending in June, the government's consumer price index rocketed ...

The IMF foresees 8.7 percent inflation in poorer emerging market and developing countries, the highest such rate since 2008. A recovering job market — employers added a record 6.7 million jobs last year and a healthy average of 457,000 a month so far this year — means that Americans as a whole can afford to keep spending. And some argued that the Fed kept rates near zero far too long, lending fuel to runaway spending and inflated prices in stocks, homes and other assets. The strong job market is boosting workers’ pay, though not enough to offset higher prices. When the pandemic paralyzed the economy in the spring of 2020 and lockdowns kicked in, businesses closed or cut hours and consumers stayed home as a health precaution, employers slashed a breathtaking 22 million jobs. The inflation of the 1970s and early 1980s peaked at 14.8 percent in March 1980 before the Fed exorcized high prices with aggressive rate hikes that caused brutal back-to-back recessions in 1980 and 1981-1982. But instead of sinking into a prolonged downturn, the economy staged an unexpectedly rousing recovery, fueled by vast infusions of government aid and emergency intervention by the Fed, which slashed rates among other things. Now, most economists expect inflation to remain painfully elevated well after this year, with demand outstripping supplies in numerous areas of the economy. Critics blamed, in part, President Joe Biden’s $1.9 trillion coronavirus relief package, with its $1,400 checks to most households, for overheating an economy that was already sizzling on its own. For months, Powell and some others characterized high inflation as merely a “transitory” phenomenon while the economy rebounded from the pandemic recession faster than anyone had anticipated. So the Fed has radically changed course by imposing a succession of large rate hikes. In February 2021, the consumer price index was running just 1.7 percent above its level a year earlier.

US Inflation

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