US inflation reaches 2.9% in June, highest in six years
Consumer prices in the United States rose in June from a year earlier at the fastest pace in more than six years, lifted by more expensive gas, car insurance, and higher rent.
The US Labor Department said Thursday that the consumer price index ticked up just 0.1 per cent in June. But inflation jumped 2.9 per cent from a year earlier, the largest annual gain since February 2012. Core prices, which exclude the volatile food and energy categories, rose 0.2 per cent in June and 2.3 per cent from a year earlier.
Solid economic growth and supply bottlenecks have pushed inflation past the Federal Reserve's two per cent target, after price gains had languished below that level for six years. That is a key reason that Fed officials expect to raise short-term rates twice more this year.
Andrew Hunter, an economist at Capital Economics, said overall inflation may decline in the coming months as the recent gas price spikes level off. Prices at the pump averaged US$2.88 a gallon nationwide Thursday, down three cents from mid-June.
"Nonetheless, with the labour market exceptionally tight and activity expanding strongly, we think that core inflation has further to rise," Hunter said in a research note. "The prospect of further tariffs on Chinese imports will only add to that upward pressure."
Household appliance prices rose in June from a year earlier at the fastest pace in five years, Hunter noted, lifted by a 13 per cent increase in washing machine costs. Trump imposed tariffs on washing machines in January.
The Fed's preferred inflation gauge has increased at a slower pace, up 2.3 per cent in the past year. But most economists expect the Fed will raise rates a total of four times this year as it attempts to keep inflation in check without cutting off growth.
With consumers and businesses spending more, trucking firms have struggled to hire enough workers to keep goods moving. That has boosted shipping prices, lifting costs for businesses that may soon be passed on to consumers.
Fuel oil has surged nearly 31 per cent in the past year, pressuring airlines. Delta cut its full-year profit outlook Thursday, citing a US$2-billion surge in fuel prices. Airlines have tried to offset rising fuel costs in a number of ways, including additional charges for passengers like bag fees.
Rents rose 0.3 per cent in June and overall housing costs have increased 3.4 per cent in the past year. Auto insurance prices also increased 0.3 per cent last month and have jumped 7.6 per cent from a year earlier.
New and used cars and medical care have also become more expensive. Clothes and household furniture fell in price last month.