The Bureau of Labor Statistics (BLS) reported that, on a seasonally adjusted basis, headline consumer prices, grew over the month of June, but at a slower pace than in May. The monthly slowdown partly reflected a decline in energy prices, electricity and utility (piped) gas specifically, although food prices accelerated over the month. Excluding energy and food prices, “core” inflation held steady, rising by 0.2 percent for the second consecutive month.
Despite the month-over-month deceleration in headline consumer inflation, year-over-year and on a not seasonally adjusted basis, headline inflation accelerated. Mechanically, this reflects the even slower growth in consumer prices 12 months ago. Excluding energy and food prices, core inflation also accelerated for a similar reason.
Earlier in the month, the BLS also reported that average hourly earnings in the private sector rose in June. However, at a 2.8 percent annual not seasonally adjusted growth rate (2.7 percent seasonally adjusted), the growth in hourly earnings was, for the first time since May 2017, less than headline consumer inflation, 2.9 percent. However, the average number of hours worked across the private sector rose 0.6 percent. As a result, average weekly earnings in the private sector, the product of average hourly earnings and average weekly hours worked, rose by 3.4 percent, exceeding headline inflation.
Over the past two months, headline inflation has slowed on a month-to-month basis. Despite the slowdown, these monthly growth rates exceed the monthly growth rates from 12 months ago. As a result, on a 12-month basis, headline inflation is accelerating. The acceleration in headline inflation has been in place since February 2018. However, given that the acceleration largely reflects very low monthly growth rates last year, then, next year, headline inflation should decelerate to a degree if more normal monthly growth rates continue.
The BLS also reported that average hourly earnings in the private sector rose by 2.8 percent in June, less than headline inflation. As a result, real, or inflation-adjusted, average hourly earnings fell by 0.1 percent over the past 12-months. The last time headline inflation exceeded average hourly earnings growth was May 2017. However, on a sustained basis, inflation exceeded average hourly earnings growth between February 2011 and March 2012.
However, the average hours worked across the private sector in June 2018 exceeded its level in June 2017. Over the past 12 months, the average weekly hours worked rose by 0.6 percent, from 34.4 hours in June 2017 to 34.6 hours in June 2018. As a result, growth in average weekly earnings, the product of average hourly earnings and average hours worked, was 3.4 percent, exceeding headline inflation.