Consumer prices rose 9.1 percent from a year earlier, the government said Wednesday, the biggest annual increase since 1981 and up from an 8.6 percent jump in May. From May to June, prices rose 1.3%, another huge increase, after prices had risen 1% from April to May. The persistent acceleration of prices has underscored the brutal effect inflation has had on Americans, with the cost of necessities, in particular, rising far faster than average income. Low-income and black and Hispanic Americans have been hit particularly hard because a disproportionate share of their income goes toward necessities like housing, transportation, and food. Rising inflation has dented consumer confidence in the economy, dented President Joe Biden’s approval ratings, posed a political threat to Democrats in the November election and raised the risk of a recession triggered by much higher interest rates. 40% of adults said in a June AP-NORC poll that they think tackling inflation should be a top government priority this year, up from just 14% who said so in December. The rise in US inflation was sparked by a rapid recovery from the 2020 pandemic recession, spurred by massive federal aid, ultra-low Fed interest rates and restrained spending fueled by savings built up during the shutdown. of the country. As Americans poured their purchases into home goods such as furniture, appliances and exercise equipment, supply chains snarled and commodity prices soared. Russia’s war against Ukraine further increased energy and food prices. In recent months, as consumer spending has gradually shifted away from goods and towards services such as holiday travel, restaurant meals, movies, concerts and sporting events, the resulting higher demand has also fueled high services inflation. Some economists hold out hope that inflation may peak in the near term. Natural gas prices, for example, have fallen from an impressive $5 a gallon in mid-June to a national average of $4.63 on Wednesday — much higher than a year ago, but a decline that could help slow inflation for July and possibly August. In addition, shipping costs and commodity prices have started to drop. Wage increases have slowed. And surveys show Americans’ long-term inflation expectations have softened — a trend that often points to more moderate price increases over time. “There may be some relief in the July numbers — commodity prices have gotten away, at least — but we are far, far from normalizing inflation and there is no tangible sign of downward momentum,” Eric Winograd said. economist at asset manager AB. The relentless pace of price increases has forced many Americans to turn to food banks or make other lifestyle changes. Among them is Marcia Freeman, 72, who lives near Atlanta and visited a food bank this week, something she rarely did before prices began to accelerate. He has stopped buying salmon and other seafood because it is too expensive. Even the cheapest store brands, he said, are now much more expensive. Freeman lives on a fixed income – she receives a pension – that doesn’t keep up with inflation. “Everything goes up,” he said, “except what we get.” Some people accuse companies of using inflation as a cover to raise prices beyond what they need to cover their own higher costs. “I feel the pain of inflation every day,” Susanna Azar said this week outside a grocery store in New York. “Every day, everything goes up and up, more than inflation — they adjust to prices. Because even if inflation doesn’t happen, they’ve raised prices.” There are signs that Corporate America has become less competitive, making it easier for companies to raise prices. But most economists say that soaring corporate prices are, at most, one of several causes of runaway inflation, not the primary one. However, the range of price gains shows how rising costs have seeped into almost every corner of the economy. Food prices are up 12.2% from a year ago, the steepest climb since 1979. Rents are up 5.8%, the most since 1986. New car prices are up 11 .4% compared to a year earlier. And average airline fares, one of the few items to see price declines in June, are still up 34% from a year ago. Energy prices rose by just 7.5% from May to June, accounting for almost half of month-on-month inflation. Natural gas prices have soared nearly 60% compared to a year ago. From May to June, the cost of dental services rose 1.9%, the largest one-month increase since record-keeping began in 1995. Excluding volatile food and energy categories, so-called core prices rose 0.7 percent from May to June, the biggest such rise in a year. Compared to 12 months earlier, core prices jumped 5.9%, below a recent peak of 6.4%, but still extremely high. Inflation is soaring far beyond the United States, with 71 million people pushed into poverty in the three months since Russia’s invasion of Ukraine, which further pushed up energy and food prices, according to the UN Development Program last week. The economic toll of the war was particularly severe in Europe, with its dependence on Russian oil and gas squeezing businesses and consumers with much higher bills for utilities, groceries, gasoline and more. Inflation hit a decade high of 8.6% last month in the 19 countries that use the euro currency and 9.1% in the UK in May. With many people out of the market for homes and looking instead to rent, the demand for apartments has driven rental prices beyond affordable levels. The average cost of new leases has jumped 14% in the past year, according to real estate firm Redfin, to an average of $2,016 a month. Rents as measured by the government’s inflation index have risen more slowly because they include all rents, including existing leases. However, economists expect the rising cost of new hires to drive the government’s measure of inflation higher in the coming months. The persistence of high inflation has irked Chairman Jerome Powell and other Fed officials, who are engaging in the fastest series of rate hikes since the late 1980s to try to slow price rises. The central bank is expected to raise its key short-term interest rate later this month by three-quarters of a point, as it did last month, with larger rate hikes likely to follow. Powell stressed that the central bank wants to see “necessary evidence” that inflation is slowing before reversing its interest rate hikes. Such data should be a “decline monthly measure of inflation,” Powell said at a news conference last month. Many economists worry that the Fed’s push to quell inflation will force it to tighten credit too aggressively, even as the economy, by some measures, is slowing. Much higher borrowing costs could trigger a recession, possibly by next year. Consumers have started to cut back on spending, home sales are falling as mortgage rates rise and factory output fell in May. Still, consistently strong job growth points to an economy that is still expanding, with little sign of an impending recession.
APTV senior producer David R. Martin contributed to this report from New York.
