Inflation in the U.S. sped up to 9.1 percent in June, the fastest pace since November 1981, the labor department reported.
Gasoline prices fueled the rise, up 11.2 percent since May and 60 percent higher than a year earlier, due to high crude prices and scant oil refining capacity.
Residential prices for natural gas were up 8.2 percent and electricity added 1.7 percent.
Energy prices overall grew 41.6 percent year on year, their fastest trajectory since the 1980 oil shock sparked by the Iranian revolution.
Other pressures also played a role.
Grocery prices rose 12.2 percent, year on year, their fastest since 1979.
Rents were up 5.8 percent, a sharp hike from May’s 5.2 percent. “Owner’s equivalent rent,” what a homeowner would pay to rent the same home, gained 5.5 percent last month, compared to 5.1 percent in May.
Housing costs account for about 31 percent of the typical household’s budget, The Wall Street Journal noted.
“High rents are really troubling because they’re locked in every year or every two years [by leases] and that’s what leads people to ask their boss for higher wages,” Lara Rhame, chief U.S. economist at FS Investments, told the WSJ.
Prices for clothing and home goods rose, while the cost of vehicles dipped.
Inflation accelerated by half a percentage point from May’s 8.6 percent, indicating that the U.S. Federal Reserve’s interest rate increases so far have had no discernable impact on prices.
The core inflation rate, which omits costs of energy and food, added 0.7 percent in June, compared to 0.6 percent in May.
The average hourly U.S. wage grew 5.1 percent in June, year over year, lagging inflation by four full points.
Adjusted for seasonal variations and inflation, earnings decreased 3.6 percent from June 2021 through June 2022, driving down Americans’ purchasing power at the fastest clip in 40 years, the WSJ said.
TREND FORECAST: Despite soaring inflation and interest rates, when accounting for inflation in negative territory, equity markets have not plummeted.
And, the odds have diminished that the new higher number boosts the odds that the Fed will raise rates by a full point when its Open Market Committee meets next week. Instead the three-quarter point is now the signal on The Street as fears of recession increase.
The central bank has set a goal of ensuring that consumers do not see inflation as endemic to the future economy, as that assumption can become self-fulfilling.