This very same news makes it clear, from the U.S. government’s own report, that core inflation is fully under control. Core prices, excluding volatile food and energy costs, have increased by 2.8% in the last year. This number is in line with the jump we saw last month and continues a pattern of core inflation holding relatively flat at a higher rate. The new data shows that last month’s price spike was revised significantly upward. That’s indicative of a more inflationary environment than we had previously expected.
In June, consumer prices were 2.6% higher than in the same month a year earlier. In May, the year-over-year rate of price appreciation was just 2.4%. Those are the monthly changes, which showed a bigger-than-expected 0.3% increase from May to June. This small increase was a reflection of the increases in core prices over that same timeframe.
Examining specific categories reveals a mixed picture. The price of major appliances jumped 1.9% in June, and furniture rose 1.3%. Computer prices were up 1.4% over this period. In sharp contrast to these upsurges, hotel room rates actually came down by a dramatic 3.6%, signaling the nature of turbulence in the accommodation market. In addition, airfares dropped by 0.7% between May and June, underscoring the volatility during this period in expenses related to travel.
Gas prices skyrocketed 6% just between May and June. At the same time, grocery prices ticked up, but at a slower pace of 0.3% increase. These changes further depict the risks consumers have to take every day when it comes to basic goods and services.
These changes in prices, especially when accounting for inflation, consumer spending barely budged, increasing a mere 0.1%. This slow pace of growth indicates that many industries are experiencing increased expenses. At the same time, consumers are moving into a more defensive mode in their spending as well.
