The Bureau of Labor Statistics reported that consumer prices increased 0.3 percent in June, easing a bit from the 0.4 percent growth rate seen in May. Still, it is clear that prices have accelerated in the second quarter, led by higher food and energy costs. The annualized rate of growth in the second quarter was 3.5 percent, a substantial jump from the 1.8 percent annual pace seen in the first quarter. Of course, this figure perhaps overstates the significance of the last three months, with the consumer price index up 2.1 percent over the past 12 months. Even there, though, the year-over-year rate has jumped from being just 1.1 percent in February.
In the June data, the largest jump in consumer prices came from energy, up 1.6 percent for the month and building off of the 0.9 percent increase in May. Indeed, the price of West Texas intermediate crude has increased from an average of $97.63 per barrel in December to $100.80 in March to $105.79 in June. Much of the latest rise in prices has stemmed from Middle Eastern turmoil, particularly in Iraq at that time. Energy costs have risen 2.8 percent in the past three months alone, primarily from higher gasoline prices.
Meanwhile, food prices were up 0.1 percent, its slowest pace of growth in four months. In fact, prices of food for the home were unchanged in June, the first non-positive growth figure in six months. Higher prices for meats and eggs were offset by some easing in the costs of bakery items, cereals, dairy products and fruits and vegetables. Nonetheless, the cost of food for the consumer has risen 1.8 percent over the past six months, something that Americans are bound to notice in the grocery aisle.
Outside of food and energy, core consumer inflation decelerated in June to 0.1 percent growth in June. Over the past 12 months, core consumer prices have risen 1.9 percent, unchanged from May but up from 1.6 percent in January. In June, the largest increases were seen in airfare, apparel, housing, medical care and tobacco.
While pricing pressures have definitely picked up in the second quarter, the year-over-year pace still remains mostly in-line with the Federal Reserve Board’s stated goals. They will no-doubt continue to watch inflation numbers closely, but the Federal Open Market Committee (FOMC) is unlikely to deviate from its current monetary policy trajectory at next week’s meeting.
Chad Moutray is the chief economist, National Association of Manufacturers.