Inflation slowed to 3.5% in June from a three-year high last month, driven by a mid-June ceasefire agreement that stabilized oil markets and lowered energy prices. The decline in energy prices offset increases in shelter and food, resulting in a monthly decrease in inflation for the first time since April 2020. However, the relief could be short-lived as the ceasefire collapsed in early July has pushed oil prices up by 12% and renewed inflation concerns.
On a non-seasonally adjusted basis, the Consumer Price Index (CPI) rose by 3.5% in June from a year ago, following a 4.2% increase last month, according to the BLS latest report. The “core” CPI, excluding the volatile food and energy components, increased by 2.6% over the past twelve months, following a 2.9% increase in May. The housing shelter index, which makes up a large portion of “core” CPI, rose 3.3% over the year, following a 3.4% increase last month. Meanwhile, the component index for food rose by 3.0%, and the energy component index increased by 15.7%.
On a monthly basis, the CPI fell by 0.4% in June (seasonally adjusted), while the “core” CPI remained unchanged.
The price index for a broad set of energy sources decreased by 5.7% in June, with decreases in gasoline (-9.7%), fuel oil (-9.2%), and electricity (-1.0%), with a minor increase in natural gas (+0.5%). Meanwhile, both food at home and food away from home indexes rose by 0.2 in June.
Outside of energy, other top contributors that fell in June included indexes for motor vehicle insurance (-2.0%), communication (-1.5%), apparel (-0.6%), medical care (-0.1%) and used cars and trucks (-0.2%). Meanwhile, the index for recreation (+0.5%), household furnishings and operations (+0.2%), and personal care (+0.2%) were among the few major indexes that increased over the month.
The index for shelter, which makes up more than 40% of the “core” CPI, rose by 0.1% in June, the smallest monthly increase since January 2021. The index for owners’ equivalent rent (OER) rose by 0.2%, while the index for rent of primary residence (RPR) increased by 0.1% over the month.
NAHB constructs a “real” rent index to indicate whether inflation in rents is faster or slower than core inflation. It provides insight into the supply and demand conditions for rental housing. When inflation in rents is rising faster than core inflation, the real rent index rises and vice versa. 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 rose by 0.1%.
