U.S. headline inflation accelerates in June
U.S. consumer prices rose 0.6 percent sequentially in the month of June, the first rise since COVID-19 hit. On a year-on-year basis, CPI rose 0.6 percent, accelerating from 0.1 percent seen in May. Energy prices rose for the first time in six months, rising 5.1 percent in June. The price of gasoline rose 12.3 percent sequentially, but stayed 23.4 percent below year-on-year levels. On the contrary, food prices rose 4.5 percent year-on-year, after another hearty rise in June.
Following three straight months of falls, core prices rose 0.2 percent sequentially in June. Thus, core inflation came in at 1.2 percent year-on-year, matching May’s pace. Prices for several categories recovered in June after considerable discounting earlier in the pandemic. Leading the way was motor vehicle insurance prices, rising 5.1 percent.
Apparel prices also bounced back. On the services side, core services prices rose strongly by 0.3 percent, driven mainly by a 0.5 percent rise in medical services costs. Medical services inflation came in at 6 percent year-on-year, the most rapid pace of inflation since the early 1990’s. Several aspects of medical care have seen prices accelerate in recent months, but the most dramatic is health insurance costs, which rose nearly 20 percent in the past year. Prices recovered for airline fares and car and truck rentals as well, rising 2.6 percent and 17.5 percent, respectively.
“June's CPI data shows evidence of price changes in response to a re-opening economy. June's data provides evidence that some of these deflationary forces have ebbed, however, some of the more persistent categories in inflation, namely shelter, continued to cool in June. With shutdowns returning across many parts of the country, prices may see renewed downward pressure. All told, we expect inflation to remain muted over the next couple of years”, said TD Economics in a research report.