Inflation rose in the United States by 5.4% since last year.
New data from the Department of Labor reveals that the Consumer Price Index rose by 0.9% since May in the most drastic one-month increase since 2008. Core inflation — which factors out food and energy costs — has risen year-over-year by 4.5%.
Economists surveyed by Dow Jones predicted a 5% increase in CPI, marking another recent instance of inflation data significantly exceeding predictions.
The Wall Street Journal reports:
Consumers are seeing prices rise for numerous reasons, as the U.S. economic recovery picks up. Richard F. Moody, chief economist at Regions Financial Corp., said the main driver of June inflation was booming demand that outpaced the ability of businesses to keep up. Another factor, he said, was the recovery in prices for air travel, hotels, rental cars, entertainment and recreation — all services hit hard by the Covid-19 pandemic.
“What this really shows is inflation pressures remain more acute than appreciated and are going to be with us for a longer period,” Wells Fargo economist Sarah House told CNBC. “We are seeing areas where there’s going to be ongoing inflation pressure even after we get past some of those acute price hikes in a handful of sectors.”
Inflation refers to the eroding purchasing power of a given currency over time. As the Federal Reserve has pursued an aggressive monetary policy, the supply of the dollar in the United States economy has drastically expanded.
The United States economy has observed accelerating inflation for the past several months. The year-over-year increase in the Consumer Price Index climbed to 5% — which, according to the Department of Labor, marked “the largest 12-month increase since a 5.4-percent increase for the period ending August 2008.” The agency’s June report, therefore, matches the former record.
Consumers are noticing inflation’s effects upon their pocketbooks. For instance, a recent survey shows that consumers forecast a 9% year-over-year increase in their back-to-school spending. Last year, they anticipated spending $247; this year, they anticipate spending $268.
Costs are also climbing for businesses. Producer prices rose by 0.8% in May — a rate that significantly exceeded forecasts of 0.5%. In January, February, March, and April, the year-over-year increases in the Producer Price Index were 1.6%, 2.8%, 4.2%, and 6.2%, respectively.