June inflation soared 9.1%, a new 40-year high, amid spiking gas prices

Inflation rose in June, continuing to rise at a 40-year pace across many sectors of the economy, driven in large part by higher energy prices.

The blistering consumer price index was 9.1 percent higher in June than a year ago and 1.3 percent higher than in May, according to a report released Wednesday by the Bureau of Labor Statistics, showing little signs of growth. The fight against inflation. The last time inflation reached 9 percent was in November 1981.

June data showed broad increases in the prices of food, energy, and housing, confirming that inflation is now the nation’s most challenging economic problem while raising fresh fears that the economy’s other strongest sources — the labor market and consumer spending — took a hit. Not enough to prevent another recession.

The energy index, which accounts for nearly half of the overall increase in inflation, drove the stunning jump, rising 7.5 percent from May. That index includes prices for fuel, oil, gasoline, and electricity, and rose 41.6 percent year-on-year, the biggest increase in the 12-month period since April 1980.

However, prices have also increased in many categories that are not considered volatile or energy-intensive, including housing, medical care, and clothing.

“There is not one iota of good news in this report,” said Michael Strain, director of economic policy studies at the American Enterprise Institute. “I had an emotional reaction to this report, and I’m trying to think of the last emotional reaction I had to an economic data release, and I think you have to go back to the financial crisis. Bewilderment. Desperation.”

Clearly, inflation has not abated. The rising pace is increasing pressure on the Federal Reserve and the White House to increase their response to rising prices. They need to convince the American people that they can successfully slow the economy without increasing the unemployment rate or shrinking the economy altogether. Financial markets tumbled on the news.

“Inflation is our most pressing economic challenge. It affects every country in the world … Tackling inflation is my top priority – and we must make even faster progress in bringing inflation under control,” President Biden said in a statement.

Few aspects of daily life have been left untouched by inflation. The food index rose 1 percent in June and was up 10.4 percent from a year earlier, the biggest increase in 12 months since February 1981. Chicken prices have risen 19 percent in the past year, the biggest increase ever.

Gas prices rose 11.2 percent in June, underscoring the economic toll Russia’s invasion of Ukraine has taken on global energy markets. As energy and gas prices have continued to fall over the past month, there is hope that the upcoming inflation data will ease slightly. The national average for a gallon of gas fell to $4.63 on Wednesday, according to AAA.

Five Charts Explain Why Inflation Is High

Rents also rose 0.8 percent in June compared with the previous month, as the cost of simply putting on a roof is becoming unaffordable for households across the country.

“It’s important that policymakers talk to the public,” said Joe Brusulas, chief economist at RSM. “At this point, we are talking about food, petrol, and housing. That does not make for a happy family.

Even “core inflation,” a data point closely scrutinized by economists because it strips out more volatile categories like food and energy, was higher in June. This is particularly worrisome because authorities need to see a return to core inflation before they can promise that overall prices will fall.

Officials at the Federal Reserve and the White House want inflation-controlling policies to yield more results. The central bank may have to work harder to slow the economy by raising interest rates, which the central bank has already done three times this year. From mortgage rates to auto loans and loans to businesses – higher interest rates are a key tool for reversing inflation by making loans more expensive, which dampens demand and cools the economy. But if interest rates are too high, they will cause even more economic pain, prompting large numbers of job losses.

June’s data included a particularly bleak period: Consumer sentiment last month fell to a level not seen since the 1980 recession, according to a closely watched survey by the University of Michigan. That decline fueled concerns that the central bank was losing the confidence of the public and financial markets — a major challenge in its fight against inflation.

“The culprits are, again, familiar consumer staples like gasoline, food, and shelter. With their sentiments at their lowest level in years, consumers have a right to be very upset,” Mark Hamrick, senior economist at Bankrate, wrote in an analyst note. Faced with a combination of inflation, they are robbed of purchasing power.”

In Louisville, Stephanie Ladd, 32, stretches every bit of $18 an hour as an accounts payable clerk. Gas has soared to $5 a gallon in recent weeks. The monthly rent for his bedroom is $600. Lott enrolled in graduate school as a teacher, but she was unable to complete her degree.

Ladd sends what money he can to his father in Mississippi. He said he’s lucky by some measures: He owns his mobile home and receives insulin for his diabetes through Medicare and Medicaid. But everything else was supposed to be $900 a month in Social Security and now his late wife’s life insurance policy. Inflation is rapidly eroding his fixed income.

“It pays for gas to go to the doctor. It pays for groceries,” Ladd said. “With my help, he can do it, but barely. We don’t know how long Dad’s money from Mom’s life insurance policy will last.

Inflation makes homelessness worse

Financial markets have fallen sharply this year as investors react to the Federal Reserve’s tightening of monetary policy. June’s inflation report raised fears on Wall Street that the Federal Reserve will need to move more aggressively to rein in prices in the coming months.

Financial markets fell, with the Dow Jones industrial average down .67 percent, the S&P 500 down .45 percent, and the tech-heavy Nasdaq index down .15 percent.

Fighting inflation is often the Fed’s job, but the Biden administration has struggled to lower prices for American families. High inflation hurt Biden’s popularity

And gas prices rose by an average of $5 a gallon across the country last month, leaving more people feeling even gloomier about the economy.

The higher-than-expected inflation data came as Democrats raced to reach an agreement on long-stalled economic spending legislation. Jared Bernstein, a member of the White House Council of Economic Advisers, told The Washington Post that such high inflation is stressing the need for Congress to pass laws that would lower costs for prescription drugs, and utility bills and increase the supply of affordable housing.

“Inflation reports like this should get every politician fired up and pushed in the same direction,” Bernstein said. “Democrats are already there. Republicans should join.

But any spending efforts were strongly rejected by Republicans. For more than a year, Republicans have attacked Democrats for overspending on Covid relief efforts, and the GOP is poised to make inflation a major focus of its midterm campaigns this year.

“Facing the worst inflation in more than 40 years, working families are struggling to make ends meet,” Sen. John Barrasso (R-Wyo.) said in a statement. “The prices of groceries, gas, rent and utilities are skyrocketing. Salary is not continuous all the time. … Working families in Wyoming cannot pay the high price of President Biden’s failed economic agenda.

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Inflation hit 9.1% in June

Inflation hit a new, 40-year high in June, with consumer prices rising 9.1% from a year ago. Gas prices were a big part of this, but the cost of essentials like food and shelter were also rising rapidly.

Inflation hit a new four-decade high last month, with consumer prices rising 9.1% from a year ago. For the typical American family, they would need to spend nearly $500 in June to maintain the same standard of living they enjoyed last year.

When prices rise, many people worry. Linda Foster, of Tacoma, Wash., says she needs to close her eyes at the grocery store these days.

Linda Foster: Everything else eats up all the spare cash. So if the cost keeps increasing, we don’t need to increase our salary to $100, $200, $300 a month.

CHANG: For Jay SB in Potomac, MD, high inflation is the difference between feeling comfortable a year ago and feeling squeezed today.

Jay Espy: I’m living on the edge here, watching how it plays out over the next six months.

SHAPIRO: Well, let’s talk about what’s behind these high prices and what can be done about them with NPR’s Scott Horsley. Hi, Scott.

SCOTT HORSLEY, BYLINE: Hi, Ari.

SHAPIRO: This new inflation report was worse than expected. What’s going on?

Horsley: We’re still living with this mismatch between very strong consumer demand and limited supply. Nowhere is this more evident than at the gas pump. Gasoline prices rose to $5 a gallon last month. And energy costs accounted for nearly half of headline inflation between May and June. It’s a drag for people like Bethany Chambliss. He recently moved to Lexington, Ky. Worked at a hospital in , which paid well but, unfortunately, was 28 miles from his home in Frankfurt.

Bethany Chambliss: I have a car that gets good gas mileage and I can handle $3.50 a gallon. But when it went up to almost $5 a gallon, that high I got was completely wiped out.

Horsley: Noticed that Chamblys was going to work, but found that apartment rents in Lexington were out of reach. Although petrol prices have eased in recent weeks, rising rents will keep pressure on inflation in the coming months.

SHAPIRO: Beyond gas prices, where else are prices going up?

Horsley: Grocery prices have risen more than 12% in the past year. Chicken, eggs, olive oil, all of these things have become more common. Economists sometimes brush off food and gasoline prices because they jump around so much and focus on what’s called core inflation. But it was also uncomfortably high. People have to pay more for clothing and medical insurance and for new and used cars. The Jai SP, we hear, has swapped its big SUV for a more fuel-efficient hybrid. So she’s saving some money on gas, but now she’s got a car note every month. And new car prices are up 12 1/2% over last year.

ESPY: The anxiety level is definitely heightened because, you know, I think, will my income still match the price increase? If I get fired or my position is removed, it will set everything back.

Horsley: Right now, at least, the job market is still strong. Unemployment is low. Employers added more than 370,000 jobs in June. But when household budgets are stretched by inflation, it increases people’s economic worries.

SHAPIRO: What are people doing to deal with these high prices?

Horsley: Wages are also rising, but they’re not keeping pace with inflation, so people have to dip into savings. In some cases, they have a large balance on their credit cards. Overall, consumer spending has held up well even in the face of these high prices. But mom Linda Foster, who we heard from in Washington state, says she and her husband are very careful with their spending.

Foster: We don’t do optional fun. We don’t go where we need to go. And so, when we have money, what does the family need? What does the family need now? Then we can put our interests aside.

Horsley: Of course, you can only cut corners when we talk about rising prices of essentials like food, shelter, and electricity.

SHAPIRO: So here it is

Let’s talk about what Ku can do. The Central Reserve is already trying to control inflation. What else can they do?

Horsley: The central bank has been aggressively raising interest rates in hopes of curbing consumer demand and bringing prices under control. The central bank is expected to raise interest rates by another three-quarter of a percentage point when it meets later this month. But after today’s report showed higher-than-expected inflation, many observers now think the Fed will go even further and raise interest rates by a full percentage point at its July meeting. That’s what the Bank of Canada did earlier today. Canada, like other countries, struggles with high inflation, although prices are not as high north of the border as they are in the United States.

Read More: INFLATION RATE EXCEEDS 9% IN JUNE, DRIVEN BY HIGH ENERGY AND FOOD PRICES

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