US Consumer Prices Pulled Up by Surge in Gas Costs

(AP Photo/John Raoux)

(CN) — American consumer prices rose 0.6% last month, driven higher by the rising costs of gasoline and food as demand increased.

The consumer price index, a gauge of inflation that measures what American shoppers pay for a wide range of products, is also up 0.6% from a year ago, according to a Labor Department report released Tuesday.

The 0.6% monthly increase in June follows decreases of 0.1% in May, 0.8% in April and 0.4% in March, when the coronavirus pandemic shut down many parts of the economy and kept people at home. States began reopening in May and June, but many have since pulled back amid a new spike in cases.

Food prices went up 0.6% last month and are up 4.5% compared to a year ago, including a 5.6% annual increase in the cost of food at home. Gasoline prices surged by 12.3% in June, while consumer energy costs overall were up 5.1%. But gasoline and energy costs overall are still cheaper than this time last year.

Not counting the always volatile food and energy sectors, core consumer prices increased 0.2% in June and 1.2% from the same time a year ago.

Even before the economic downturn caused by the pandemic, inflation has consistently stayed below the Federal Reserve’s 2% annual target. The recession means inflation pressures will likely stay low for the foreseeable future.   

“The rebound in consumer prices last month confirms that the disinflationary impact of the lockdowns in March and April is now going into reverse, but inflation is likely to remain muted over the coming quarters even as economic activity continues to recover,” said Andrew Hunter, senior U.S. economist at Capital Economics.

Joel Naroff of Naroff Economic Advisors noted that despite inflation being “quite tame,” the cost of eating at home is on the rise.

“Meat, poultry and fish costs are up double-digit over the year, but most other food prices rose sharply as well. Being the one who does the shopping in the house, I can testify that costs are surging and the supply chain remains frayed as well,” he wrote.

But he also said the surge in gas costs last month should be seen in the context of the plummeting prices at the start of the coronavirus crisis.  

“As for energy costs, the rise looks high, but prices are coming off the shutdown lows and they are still at moderate levels,” Naroff said.  

The Labor Department also reported last week that U.S. wholesale prices decreased slightly in June, pulled down by a big drop in food costs despite a jump in energy prices.

The government’s producer price index, another measure of inflation that tracks costs before goods reach the consumer marketplace, fell 0.2% last month and are down 0.8% from a year ago.

Wholesale food costs fell 5.2% in June while energy prices jumped 7.7%, including a 26.3% surge in gasoline costs, mirroring the increase seen on the consumer side.  

Excluding the food, energy and trade services categories, so-called core wholesale prices went up by 0.3% in June but are down 0.1% from the same time last year.

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