Inflation Hits 9.1%

The CPI has hit yet another four-decade high.

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WSJ (“U.S. Inflation Hits New Four-Decade High of 9.1%“):

U.S. inflation reached 9.1% in June, its highest rate in nearly 41 years, the Labor Department said.

The consumer-price index’s pace for June eclipsed May’s annual rate of 8.6% that led Federal Reserve officials to shift to a faster pace of benchmark interest-rate increases, according to meeting minutes released last week.

Core prices, a measure that strips out volatile food and energy components, increased by 5.9% in June from a year ago, a slightly slower pace than May’s 6%, the Labor Department said Wednesday. On a month-to month basis, core prices accelerated slightly to 0.7% in June compared with the prior month, when they rose by 0.6%.

Prices were up broadly across the economy, with gasoline far outpacing other categories with an 11.2% gain over the prior month. Gasoline prices have been on a downward path in recent weeks. Shelter and food price increases were also major contributors to inflation, the Labor Department said.

Investor expectations of slowing economic growth world-wide have led to a decline in commodity prices in recent weeks, including for oil, copper, wheat and corn, after those prices rose sharply following the Russian invasion of Ukraine. Retailers have warned of the need to discount goods, especially apparel and home goods, that are out of sync with customer preferences as spending shifts to services and away from goods, and consumers spend down elevated savings. Economists expect those developments to subdue price pressures in the coming months.

“There’s a pretty serious recession fear affecting a broad range of asset prices,” said Laura Rosner-Warburton, senior economist at MacroPolicy Perspectives.

Retailers’ ability to shed unwanted inventory could test whether pricing is returning to prepandemic patterns, Ms. Rosner-Warburton said. Some retailers, such as Target, have already said they are planning big discounts. Others with robust warehouse capacity, such as Walmart Inc., could be more likely to hold on to their excess inventory, analysts say.

CNBC (“Inflation rose 9.1% in June, even more than expected, as price pressures intensify“) adds:

Shoppers paid sharply higher prices for a variety of goods in June as inflation kept its hold on a slowing U.S. economy, the Bureau of Labor Statistics reported Wednesday.

The consumer price index, a broad measure of everyday goods and services, soared 9.1% from a year ago, above the 8.8% Dow Jones estimate. That marked another month of the fastest pace for inflation going back to December 1981.

Excluding volatile food and energy prices, so-called core CPI increased 5.9%, compared to the 5.7% estimate.

On a monthly basis, headline CPI rose 1.3% and core CPI was up 0.7%, compared to respective estimates of 1.1% and 0.5%.

Taken together, the numbers seemed to counter the narrative that inflation may be peaking, as the gains were based across a variety of categories.

Energy prices surged 7.5% on the month and were up 41.6% on a 12-month basis. The food index increased 1%, while shelter costs, which make up about one-third of the CPI rose 0.6% for the month and were up 5.6% annually. This was the sixth straight month that food at home rose at least 1%.

I don’t have any brilliant insights to add here. To state the obvious, this ain’t good news for the country or the governing party’s prospects in the November elections.

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James Joyner
About James Joyner
James Joyner is Professor and Department Head of Security Studies at Marine Corps University's Command and Staff College and a nonresident senior fellow at the Scowcroft Center for Strategy and Security at the Atlantic Council. He's a former Army officer and Desert Storm vet. Views expressed here are his own. Follow James on Twitter @DrJJoyner.

Comments

  1. Daryl and his brother Darryl says:

    Gas prices have been FALLING steadily, every single day, for 3 straight weeks, yet this report shows RISING gas prices as a leading cause.
    So everyone is getting their panties in a twist over what is clearly a lagging indicator.

    In the meantime we are learning that Trump, at least 10 Congresspersons, and at least one SC Justice, conspired in the biggest crime ever committed in the United States of America.

    Let’s focus on what is important, eh?

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  2. James Joyner says:

    @Daryl and his brother Darryl: I’m getting the quick posts out of the way before getting to that one, as it’s time-consuming. But I suspect food and gas prices will be more important in voters’ minds than that story. And, yes, gas prices are down slightly—although probably not for long, since oil prices are claiming again. They’re still very high compared to what Americans are used to.

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  3. Daryl and his brother Darryl says:

    @James Joyner:

    But I suspect food and gas prices will be more important in voters’ minds than that story.

    You’re most likely right…and how friggin’ sad is that?

    *Speaking to their grandchildren*
    Yes – I know we gave up on Democracy, and installed a fascist King…but gas was so expensive!!!

    4
  4. Kathy says:

    @Daryl and his brother Darryl:

    Don’t you know common civil wars are a great economic boon? Imagine one in a nuclear state!

    1
  5. Scott says:

    @Daryl and his brother Darryl: We’re down to about $.90 to $3.90/gallon in San Antonio. I’m seeing price reduced symbols on realtor.com and zillow houses in my neighborhood. All anecdotal, of course. Seems to me this is a lot like after WWII when the war ended, everybody had cash, and everybody wanted to get back to normal. It, unfortunately, will take time for the economic system to reach an equilibrium.

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  6. Just nutha ignint cracker says:

    I’ve noticed the gas prices, it’s hard to avoid noticing even if I only fill my tank every other week. (And I’ve been down as seldom as once a month.) Commodity prices are something I don’t notice as much. I suspect that I don’t notice them because I switch to what economists call “inferior goods” so easily.

    And in good news on the real estate front, the median price for a house in my home town of Seattle dropped to $1 million last week again. That’s bound to be good news for the guys driving buses and such.

  7. Jay L Gischer says:

    I’m a bit of a contrarian. For instance, 12 years ago, this kind of inflation would have been a strategic godsend, if short-term uncomfortable.

    Because while prices rise faster than wages, wages and income inevitably follow. The net result is something that is good for debtors and bad for creditors. Which is why the Fed, which is much more attentive to the needs of bondholders than to the needs of homeowners, aggressively swats down inflation.

    We really could have used the debt cramdown 12 years ago. Now, it’s iffy, but probably still useful. We spent the last ten years with miniscule interest rates. Once we weather this inflation season, interest rates (and also inflation rates) will return to something a bit more manageable.

    Not that paying 6.50 a gallon is fun.

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  8. Kathy says:

    We had a mild, by regional standards, case of hyperinflation in the mid 80s. I think it peaked around 150%. Banknotes of 50,000 pesos became common, and I think the highest denomination went to 100,000 (and no one could make change for it). The peso kept steadily falling against the dollar, reaching a low of around 3,500 to 1.

    The economy was not that bad. Prices rose faster than wages, but wages rose. Unemployment wasn’t high. The thing is savings were wiped out, and many people pretty much spent their money as fast as it came in, as it would buy less tomorrow than it would today. That’s the worst thing about inflation: it kind of sticks your mind firmly into the present.

    By contrast in 1994 the peso did a major collapse, stocks fell, interest rates rose sky high, people with mortgages lost their homes in droves, debts became huge burdens, unemployment rose and the economy tanked.

    I’d rather have inflation.

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  9. Daryl and his brother Darryl says:

    @Scott:
    There’s also a war going on that is severely affecting commodity prices.
    But wages are up.
    There are tons of jobs.
    So – yeah, I agree with you.

    1
  10. Lounsbury says:

    @Daryl and his brother Darryl: Apparently the Left in the USA learned largely nothing or has forgotten their policy errors and price paid of the 1970s.

    The inflation data in USA as well as also elsewhere show composition of inflation components broadening as the sustained effects of both food and hydrocarbons elevated levels – although increases are fading, remaining elevated – impact directly and indirectly other product pricing – the longer sustained pricing pressure occuring the more pass through occurs into intermediary and final goods and the broader the pass through across product value chains.
    Combined with large monetary creation during pandemic, and repeated supply shocks, one has the nice components of a modified rerun of the 1970s, right down the same policy errors from the Left in general.
    To refer to Mohamed El Erian

    Such a belated policy reaction will increase the risk of a recession, especially given that economic activity is slowing. This adds the curse of income insecurity to the serious erosion in purchasing power caused by inflation — phenomena that hits the low income earners particularly hard.

    Fortunately, inflation will come down over the next three months. That’s the good news. Less good is the continued broadening of price pressures that was evident in today’s detailed data. That adds to the considerable uncertainty that surrounds the stickiness of an inflation process that the Fed has allowed to get more entrenched into the economy.

    As such, and especially if the Fed fails to get its act together quickly, it would be foolish to dismiss the chance of a third wave of inflationary pressures that would interrupt and reverse the downward movement of the next three months.

    Democrats rather than continuing with hand waiving inflation denialism rather should pivot to supporting killing it quick. Stopping inflation and sharp but brief recession is rather better for your 2024 than your repeating the rhetorical and policy errors of the 1970s

    Of course the What Me Worryism evident among the Left commentariats online rather reflects their priviledged position in stark contrast to working class wage earners – another awkward item along with the alienating cultural agenda. Tone deafness setting up a smarter-MAGAesque for the 2024, regrettably.

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  11. Gustopher says:

    Rents are up, well above inflation in every major metro area and in most of the rural areas as well.

    Countless reasons — consolidation of landlords, people wanting bigger places to have a home office, Airbnb, real estate bubble, not enough construction…

    Population has been relatively flat due to greatly reduce immigration, and units aren’t vanishing (other than Airbnb, which is likely minor), so it’s not just a simple supply and demand issue (although there definitely is some of that as people move to better places, but even Detroit has rising rents).

    It’s a brewing crisis, basically across the country, worse in some spots than others (Miami up almost 60% in two years).

    Housing is pretty low on Maslow’s Hierarchy of Needs, and I have no doubt that stressed people will vote for pretty much anyone who promises a simple solution with an attractive scapegoat.

    Gas is a pretty small budget item for most families compared to housing.

    2
  12. Kathy says:

    @Gustopher:

    I’d take a look at how many rental properties have been acquired by private equity firms.

    1
  13. SC_Birdflyte says:

    @Scott: My thoughts exactly. What we had in 2020 was to have the economy come screeching to a halt and once it finally started to recover, there were the shocks from new Covid variants. Then, at a time when it seemed we could start to breathe easy once more, Tsar Vlad the Shirtless decides to start a war that ranges almost everyone else on both sides of the Atlantic against him. But this kind of analysis gets no traction.

  14. Jay L Gischer says:

    @Lounsbury: For what it’s worth, even though I’m less concerned with inflation as I said upstream, I don’t necessarily disagree with the politics you mention. If voters are unhappy about it, politicians need to address it. The amount of “never mind, you are wrong” a politician can manage is very, very limited.

    Me, as a private citizen, can manage it much better. And I understand this comment section as my opportunity to say how I feel, not how “Democrats feel”.

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  15. Ken_L says:

    Inflation in July 1981 was 10.8%. It didn’t drop below 3% until June, 1983, and was back over 4% all through 1984.

    It was ‘Morning in America’.

    Democrats need to stop rending their garments, wailing “Oh we feel your pain!” and muttering that the president is too old. They seem utterly incapable of making lemons out of lemonade and crafting a positive narrative, whereas to Republicans it comes as naturally as lying.

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  16. Lounsbury says:

    @Jay L Gischer: Of course.
    And my concern for your inflation is principally that the prospect of the Orange Cretin returning to presidency is deeply worrisome, and online Democrat commentariat – including sadly normally persipacious ones like Drum – are engaged in deluded “it’s transitory, no it is fading” denialism about the issue (or as here supra, “I prefer inflation and jobs”) which in combination with the foolish Academic orientated cultural-political discourse is lining you up to lose in 2024. Economic and Cultural tone-deafness with respect to the working class…. I would rather prefer you not have a return of the Orange Cretin. Quite sincerely would not.

    Historically inflation is popular poison, most particularly with respect to fixed income (the retirees) and the lower salary brackets aka working class. If Democrats foolishly replicate their early 1970s hand waving away, it will be an ugly upcoming decade for all.

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  17. Kathy says:

    Inflation is like time. we all think we know what it is, we all struggle to define it. Is it an unjustified increase in the money supply, or a generalized rise in prices? Does the latter simply measure the former, or are they unconnected?

    What I think is happening is relatively simple. Demand went down during the height of the pandemic. Production was scaled back as a result. things like planes were grounded and stored, and places like refineries were deactivated and closed.

    Storing a plane takes little time. Taking it out of storage and getting it ready to fly safely takes weeks. same with refineries, factories, cargo ships, oil wells, etc. So now that demand is up, supply is slow to catch up.

    Also, payrolls were decreased, despite things like the paycheck protection program. I know how this went down in airlines. No one was fired, but many were offered a one time payoff to take early retirement, typically those with the most seniority* and more experience, because they have the highest pay. training new pilots takes months, not weeks, if not years.

    So more people want things than there are things to buy, and the lack of sufficient capacity means they are more expensive, ergo prices go up.

    But we can blame all the inflation on the last COVID relief bill.

    *BTW, seniority is how airlines operate as pilots and cabin crew are concerned. This makes it very hard for pilots and flight attendants to find or take jobs at other airlines. A captain with 15 years of experience at Southwest, for example, won’t get the same pay if she takes a job with United. She’d have to start over at the bottom with no seniority.

  18. Lounsbury says:

    Inflation is very simply too much money chasing too few goods.

    Leaving aside words like ‘justified’ and ‘unjustified’ with embedded moral judgement if unintended – there is a money to goods mismatch.

    However the factors of this inflation episode are multi-variant and complex – clearly the last round of the Covid support globally, not merely USA, was too much injection of liquidity in the face of ongoing supply constraints for logistical reasons tied to Covid certainly, but also from policy errors in inattention and complacency after several decades of principally deflationary counter-pressures overriding inflationary pressures.

    The continuation of the QE by Central Banks – USA, Euro – in combination with Covid relief payments were too much. Rather than engage in political agenda motivated denialism, if you actually wish to be “reality based community” as the pretence goes, then accept the last round was an error, which in itself is not problematic, the risk it was addressing was real. The problem is denying it was an error and hand-waving inflation away, which is neither a credible popular communication position nor a well-founded policy position (recognising that the two have different needs). It’s simply political tribalism and denial.