In June, consumer prices increased at the fastest pace in the past 13 years. The recent surge in inflation mainly reflect increases in a few sectors influenced by the pandemic shutdown and rebounding demand as the economy fully reopens.
The Bureau of Labor Statistics (BLS) reported that the Consumer Price Index (CPI) rose by 0.9% in June on a seasonally adjusted basis, following an increase of 0.6% in May. It marks the largest increase since June 2008. Excluding the volatile food and energy components, the “core” CPI increased by 0.9% in June, after increases of 0.7% in May and 0.9% in April. It marks the third straight monthly surge in the core inflation.
In June, prices increased sharply in a few major sectors. The indexes for used cars and trucks jumped by 10.5% in June, accounting for more than one-third of the seasonally adjusted all items increase. New car prices, airline fares, and the prices for energy commodities increased by 2.0%, 2.7% and 2.6%, respectively.
Meanwhile, supply-side constraints and strong consumer demand have driven prices up in almost every consumer sector. The indexes for food at home and food away from home rose by 0.8% and 0.7%, respectively. The indexes for apparel (+0.7%) and transportation services (+1.5%) increased as well. The index for shelter, which makes up more than 30% of headline CPI, rose by 0.5% in June. The index for owners’ equivalent rent (OER) increased by 0.3%, the largest gain since April 2019.
During the past twelve months, on a not seasonally adjusted basis, the CPI rose by 5.4% in June, the biggest 12-month gain in the past 13 years. The “core” CPI increased by 4.5% over the past twelve months, the biggest 12-month gain since September 1991. The food index rose by 2.4% and the energy index rose by 24.5% over the past twelve months. Noticeably, over the past twelve months, major household appliances, laundry equipment (sub-index of major appliances), and furniture and bedding were up 13.7%, 29.4%, and 8.6% in June, respectively.
NAHB constructs a “real” rent index to indicate whether inflation in rents is faster or slower than overall inflation. It provides insight into the supply and demand conditions for rental housing. When inflation in rents is rising faster (slower) than overall inflation, the real rent index rises (declines). The real rent index is calculated by dividing the price index for rent by the core CPI (to exclude the volatile food and energy components).
In June, the Real Rent Index declined by 0.6%, after a 0.5% decrease in May. Over the first six months of 2021, the monthly growth rate of the Real Rent Index declined by 0.3%, on average.