The Economy

U.S. Consumer Prices Increase 0.2% in June

It was the fourth straight monthly gain but food prices dropped 0.3% and inflation remains low by historical standards.
Christopher HosfordJuly 15, 2016

Consumer prices in the United States rose for a fourth straight month in June but the gain was less than expected, with cheaper food costs offsetting higher shelter and energy prices.

The consumer price index increased a seasonally adjusted 0.2% last month, the Labor Department said Friday, following gains 0.2% in May and 0.4% in April. Economists had forecast an increase of 0.3% in June.

For the 12 months through June, the CPI advanced 1.0%, below the 1.7% average annual increase over the past 10 years.

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“Although upward pressures on consumer prices have emerged in recent months, inflation is still quite low by historical standards,” MarketWatch noted. “What’s more, there’s little reason to expect that to change anytime soon, especially with gasoline prices leveling off after reaching a summer peak.”

Core CPI, which strips out food and energy costs, also rose 0.2% in June, matching the increase of the previous two months and lifting the year-on-year gain to 2.3% the highest level since May 2012.

The Wall Street Journal said the broader price trend suggests gains are accelerating in some key categories, especially services. “While energy prices remain well below their levels from last June, costs for shelter, medical care, transportation services, and clothing all have risen sharply,” it reported.

Shelter costs, which account for about one-third of CPI, are up 3.5% from a year earlier, the biggest rise since September 2007. But grocery prices continued the biggest sustained drop since 2010, with the so-called food at home index falling 0.3% in June and 1.3% in the past 12 months.

The Federal Reserve has set a 2% annual target for inflation but its preferred measure, the Commerce Department’s personal-consumption expenditures price index, was up only 0.9% in May from a year earlier. Core prices rose 1.6% on the year.

“On the inflation front, there are signs of firming as the dollar has stabilized, and oil and gas prices have risen substantially,” Philadelphia Fed President Patrick Harker said Wednesday in a speech. “I believe that inflation will return to target sometime next year.”