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U.S. consumer prices Jump higher June appeared at the fastest rate in about 13 years, even surpassing the highest forecast, which cast a shadow over the Fed’s statement that inflation related to the reopening of the economy will be purely a “temporary” phenomenon.

The US Bureau of Labor Statistics’ consumer price index rose 0.9% last month from May and 5.4% from June 2020. Even excluding items with high volatility such as food and energy, the annual growth rate of the “core” CPI is still 4.5 percent.

The following are the factors driving the jump:

Second-hand car

The surge in used car prices drove most of the increase in the previous month, rising 10.5% from the previous month and 45% from June 2020, accounting for one-third of the CPI increase.

Federal Reserve Chairman Jay Powell has repeatedly cited used car prices as evidence of the temporary nature of the current economy. inflation Especially when the shortage of semiconductors has led to a serious interruption in automobile production.

He said at a press conference after the Fed’s last monetary policy meeting: “The rise in used car prices is a perfect storm of limited supply because of strong demand.” “It is rising at an amazing annual growth rate. But we do think the stop is It makes sense, in fact it will reverse over time.”

Powell also told investors to pay attention to the “base effect”, which would cause year-on-year growth to look excessive, given the collapse of activity at the peak of the pandemic last year.

U.S. CPI Used Cars and Trucks Index (YoY Change, %) line chart shows record appreciation of used car prices

Energy prices

As Americans got rid of pandemic restrictions and set off again, fuel prices soared this year, and energy costs last month rose 1.5% from May. Compared with the same period last year, they have increased by 4.5%.

Gasoline prices in June rose 2.5% from May. Gasoline demand reached a record weekly high before the July 4 holiday, pushing the national average fuel price to around $3.10 per gallon. This is the highest level in the past seven years and is 40% higher than the same period last year. Prices are even higher in big cities, with drivers paying more than $4 per gallon on pumps in California.

For consumers, there may not be much relief.As global crude oil prices rise, fuel prices rise USD 70 per barrel In recent weeks, it has set the highest level since 2018.

travel

The relaxation of the Covid-19 lockdown has also contributed to another good month for airfares and hotel prices. Between May and June, airfare prices rose by 2.7%, while hotel fees rose by 7.9%. Since June 2020, these industries have grown by approximately 25% and 17%, respectively.

Car rental costs have also risen sharply, with consumers facing June prices that were 5.2% higher than the previous month.

Ellen Zentner, chief U.S. economist at Morgan Stanley, said: “With these increases, the hotel price index is now much higher than the level before the epidemic, and there is still room for the air ticket price index to rise further.” “Although it is sensitive to the pandemic. Price increases should eventually begin to reduce their contribution to the overall CPI, but there is still much room for contribution.”

rent

One area of ​​concern for economists is the rise in landlord’s equivalent rent, which measures the purpose of renting a house.

Aneta Markowska, chief economist at Jefferies, said that as the “largest and most sticky component of the CPI,” this indicates that inflationary pressures are beginning to expand beyond the areas most sensitive to pandemic recovery.

Prices in June rose by 0.3% month-on-month, which was consistent with the increase in May, but the increase was enough to cause concern. Compared with June 2020, prices have increased by 2.3%.

“CPI rents have been slow to adapt to reality because individual properties are only surveyed once every six months,” Markowska said. “The recent increase in market rents shows [or] Significant upside in the coming months. Therefore, even if second-hand car prices reverse and put downward pressure on CPI, rents will develop in the opposite direction. “

U.S. CPI landlord equivalent rent line chart (year-on-year change, %) shows that inflationary pressures are beginning to expand

service

Not all sectors of the economy are pushing prices up. Medical expenses and household goods costs are one of the few important industries where prices fell last month.

But eating out has become more expensive, and the price of food that runs away from home is 0.7% higher than last month. Compared with the same period last year, costs increased by 4.2%.

Capital Macros US senior economist Andrew Hunt said that this increase provides “clear evidence of severe labor shortages and pressure from rising wages in the leisure industry.” [are] Hello, pass. Both of these trends seem to have a long way to go. “

Therefore, economists warn that it is becoming increasingly difficult to rule out the risk that inflation may be more persistent than initially expected.

Stephen Stanley, chief economist at Amherst Pierpont, said: “The most noticeable growth is still those that have reopened, so it can be said that most of the growth is temporary.” “But the problem is that when you run at this rate, You will still have some considerable growth… and some basic categories start to show acceleration.”

Additional report by Justin Jacobs

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