Daily Management Review

June Inflation Rate In United States Highest In 13 Years


Supply side constraints and a continued revival in the costs of travel-related services after the depressed costs during the pandemic pushed June inflation levels in the United States to a 13 year record high even as the country’s economy continues to strongly rebound from the pandemic. 
In the price surge as reported by the US Labour Department, more than one-third of the surge in prices was accounted for by used cars and trucks. Economists are still of the view that this inflation rise is transitory and temporary in nature which is in line with the long-standing views of Federal Reserve Chair Jerome Powell.
"June's CPI numbers looked scary, but once again, we see that it was mainly temporary price increases that pumped up the figures," said Robert Frick, corporate economist with Navy Federal Credit Union in Vienna, Virginia. "Overall, this report is consistent with inflation cooling off later this year."
There was a 0.9 per cent rise in the consumer price index in June which was the highest rise since June 2008, and was preceded by a 0.6 per cent rise in May. According to estimates of economists, the CPI was anticipated to rise by 0.5 per cent.
The prices of used cars rose in June by 10.5 per cent which was the biggest jump since January 1953 when this series was tracked for the first time. The major driver of inflation in the US in recent months has been the rise in prices of used cars and trucks.
In June, they surged a record 45.2 per cent on a year-on-year basis. Motor vehicle production has been subdued because of a global semiconductor shortage which resulted in a strong rise in prices of new motor vehicle. The demand has primarily been driven by rental companies that are seeking to quickly restock their fleets following offloading their fleets during the pandemic. However it is estimated that the price rise of used cars will soon slow down, showed some industry reports. 
However, there are also concerns about the current inflation as it is spreading beyond the core sectors that were at the centre of the reopening of the US economy. According to data, prise rise was witnessed in food, gasoline, rents and apparel segments in June.
Such a spread could further the criticism of the very accommodative monetary and fiscal policies being followed by the US Fed. According to analysts, demand in the US economy is being fuelled by Covid-19 vaccinations, low interest rates and the almost $6 trillion government relief that was provided since the pandemic started in the United States in March 2020. That has put intense pressure on the the supply chain.
There is cautious optimism among officials of the White House of the current inflation surge being transitory as they pointed out to a continued fall in forward prices for lumber and other goods that went through a period of sharp increases earlier because of bottlenecks in supply chain. They said that over the past few months, there has also been a substantial rise in steel capacity.