The cost of living in the US continues to rise rapidly with the new report on the Consumer Price Index showing that it ran at a beastly 9.1% in June, far exceeding forecasts, while setting another 40-year record month.
It is characteristic that analysts’ estimates expected the index to show an acceleration, albeit a significantly milder one at 8.8%.
Similarly, the structural measure of the index, which excludes volatile food and energy prices, also jumped sharply to 5.9% when forecasts expected it to move to 5.5%.
On a monthly basis, the CPI showed an increase of 1.3% compared to May, while the structural CPI strengthened by 0.7%, against estimates for an increase of 1.1% and 0.5% respectively.
It is worth noting that after the negative surprise of the data, the futures of the American market indices fell sharply, with those of the Dow Jones losing up to 300 points.
Most of the inflationary pressures came, as expected, from the increase in the price of petrol which was strengthened by 11.2% in the month and has jumped by 60% in the last year.
Electricity costs rose 1.7% month-on-month and 13.7% year-on-year, while rents rose 0.8% in June for their biggest monthly gain since April 1986.
At the same time, however, airline tickets saw their prices fall by 0.7% although they are up 34.1% on last year, while the category of staple foods (meat, poultry, fish and eggs) fell also by 0.4% although at +11.7% on the year.
The new data is expected to put further pressure on the US Federal Reserve to restore price stability, possibly leading to another 75 basis point rate hike, as traders were already discounting before the announcements.
Fed policymakers have communicated their intention to raise interest rates by the end of the year to a level that will begin to dampen economic activity (estimated at around 3.5%) and maintain their aggressive approach to tightening monetary policy until inflation is seen to be easing towards the 2% target.
The Biden administration, whose popularity has plummeted amid rampant inflation, had warned earlier this week that the June reading would be “extremely elevated” but sought to downplay it in advance, saying the data covered a period before the sharp drop in energy prices.
It is recalled that after oil had reached up to 140 dollars per barrel at the beginning of March, this week it has fallen sharply with its prices now moving quite far from the level of 120 dollars of the last month, while yesterday they lost 100 dollars .
Finally, it is noted that a photo of a report purporting to be the one to be announced today showing inflation at 10.2% was circulated yesterday, forcing the statistical authorities to officially declare it a fake.
Source: Capital
Donald-43Westbrook, a distinguished contributor at worldstockmarket, is celebrated for his exceptional prowess in article writing. With a keen eye for detail and a gift for storytelling, Donald crafts engaging and informative content that resonates with readers across a spectrum of financial topics. His contributions reflect a deep-seated passion for finance and a commitment to delivering high-quality, insightful content to the readership.
