The index’s rise was predominantly driven by energy costs surging year-over-year by 10%. Gas prices reached $5.00 per gallon in early June before falling to a national average price of $4.61 as of Thursday, according to AAA.
The release comes one day after another Bureau of Labor Statistics report showed the Consumer Price Index (CPI) increasing 9.1% between June 2021 and June 2022 — marking a four-decade high. Over the past year, the price of food increased 10.4%, the price of energy increased 41.6%, and the price of new vehicles increased 11.4%.
President Joe Biden pointed to somewhat lower prices at the pump as an indication that the most recent inflation news is outdated. “Energy alone comprised nearly half of the monthly increase in inflation. Today’s data does not reflect the full impact of nearly 30 days of decreases in gas prices,” he said in a statement. “Those savings are providing important breathing room for American families.”
Likewise, National Economic Council Director Brian Deese said in an interview with CNBC host Carl Quintanilla that the inflation report is “backward-looking” and fails to reflect the decline in gas prices. He added that lawmakers should address the supply-side issues contributing to higher inflation by passing semiconductor manufacturing incentives — a remark that caused Quintanilla to note that “more spending is not what you typically do in the face of high inflation.”
Indeed, 34% of small business owners are calling inflationary pressures their “single most important problem” — the highest level since 1980, according to the National Federation of Independent Businesses’ most recent Small Business Optimism Index.
“As inflation continues to dominate business decisions, small business owners’ expectations for better business conditions have reached a new low,” NFIB Chief Economist Bill Dunkelberg remarked. “On top of the immediate challenges facing small business owners including inflation and worker shortages, the outlook for economic policy is not encouraging either as policy talks have shifted to tax increases and more regulations.”
Likewise, investment bank JPMorgan Chase’s most recent Business Leaders Outlook Pulse revealed the highest degree of pessimism among executives in the 12 years since the survey began. Though 71% remain optimistic about their firms, a mere 19% of midsize business leaders are optimistic about the national economy.
“The first half of 2022 has really tested business leaders with pricing pressures and increased interest rates, on top of the supply chain- and labor-related issues they were already facing,” Ginger Chambless, head of research for JPMorgan Chase Commercial Banking, explained. “While it’s surprising to see how drastically sentiment has shifted, it is important to note that business leaders are still mostly upbeat when it comes to their companies and areas that they can more directly control.”
While 99% of executives report higher operating costs, 76% are passing more of their expenses to consumers by raising prices. Among the causes for the higher prices reported by the respondents are efforts to retain employees (77%), persistent supply chain issues (74%), and hiring difficulties (71%).