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Montevideo, December 5th 2022 - 04:00 UTC

 

 

US consumer prices rebounded 0,6% in June; gasoline climbed 12,3% after sliding the previous five months

Wednesday, July 15th 2020 - 08:57 UTC
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The increase, which ended three straight months of declines, was driven by a 12.3% jump in gasoline prices after dropping in the first five months of the year. The increase, which ended three straight months of declines, was driven by a 12.3% jump in gasoline prices after dropping in the first five months of the year.

US consumer prices rebounded by the most in nearly eight years in June, but a resurgence in new COVID-19 cases after the reopening of businesses suggests moderation in demand that could keep inflation muted and allow the Federal Reserve to keep injecting money into the ailing economy.

The report from the Labor Department on Tuesday came as some densely populated states in the South and West regions were dialing back or pausing re-openings, overwhelmed by rising infections of the respiratory illness. California on Monday announced new business restrictions.

The US economy slipped into recession in February. Economists are warning of a prolonged slump in the absence of a comprehensive national effort to combat the coronavirus pandemic, which is making consumers cautious about spending.

“The economic downturn is going to last longer with the second wave of the coronavirus pandemic spreading across the nation and this extended period of weak growth and soft demand will keep the inflation genie locked in her bottle for longer as well,” said Chris Rupkey, chief economist at MUFG in New York.

The consumer price index increased 0.6% last month, the biggest gain since August 2012, after easing 0.1% in May. The increase, which ended three straight months of declines, was driven by a 12.3% jump in gasoline prices after dropping in the first five months of the year.

Food prices rose a solid 0.6%. The cost of food consumed at home increased 0.7%. Beef prices maintained their upward trend, advancing 4.8%. The cost of beef has shot up 20.4% over the last three months, reflecting shortages as a result of COVID-19 infections at meat processing plants. Consumers also paid more for nonalcoholic beverages, fruits and vegetables.

The index for food away from home rose 0.5%. Prices for full service meals surged a record 0.9%, likely reflecting higher operating costs for reopening restaurants.

In the 12 months through June, the CPI climbed 0.6% after gaining 0.1% in May, which was the smallest year-on-year rise since September 2015

The Fed is pumping money into the economy through extraordinary measures, including large-scale asset purchases and funneling loans to firms. Separately, the government has provided nearly US$ 3 trillion in fiscal stimulus, contributing to a record monthly budget deficit in June.

There have been fears that the unprecedented stimulus could stoke inflation. But with a record 33 million people on unemployment benefits, inflation is likely to remain benign. Gross domestic product is expected to have declined in the second quarter at its steepest pace since the Great Depression.

The US largest banks warned on Tuesday that the worst for the economy was still to come after reporting sharp declines in profits in the second quarter.

Excluding the volatile food and energy components, the CPI rose 0.2% in June after slipping 0.1% in May. The so-called core CPI had dropped for three consecutive months for the first time since the series started in 1957.

Apparel prices jumped 1.7%, the most since February 1990. Airline fares accelerated 2.6%, the largest gain since May 2015. Consumers also paid more for healthcare, household furnishings, tobacco and hotel and motel accommodation.

But owners’ equivalent rent of primary residence, which is what a homeowner would pay to rent or receive from renting a home gained 0.1%, the smallest rise since July 2013. That likely reflects forbearance agreements between landlords and tenants who have lost their jobs or have had their hours cut because of the pandemic. This rent measure rose 0.3% in May.

In the 12 months through June, the core CPI increased 1.2%, matching May’s gain.

Categories: Economy, Politics, United States.

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