The consumer price index rose 5.4% from a year ago, the biggest jump since August 2008, just before the worst of the financial crisis. Economists polled by Dow Jones expected a gain of 5%.
Excluding volatile food and energy prices, the core CPI rose 4.5%, the biggest move for this measure since September 1991 and well above the estimate of 3.8 %.
On a monthly basis, all-item and base prices both increased 0.9% from an estimated 0.5%.
Stock market futures fell in the wake of the report, while government bond yields, which fell sharply, were mixed.
“What this really shows is that inflationary pressures remain more acute than appreciated and will be with us for a longer period of time,” said Sarah House, senior economist at Wells’ merchant and investment bank. Fargo. “We are seeing areas where there is going to be continued inflationary pressure even after overtaking some of these sharp price hikes in a handful of sectors. “
A separate report from the department’s Bureau of Labor Statistics noted that the large monthly rise in consumer prices translated into negative real wages for workers. Real average hourly earnings fell 0.5% for the month, as a 0.3% increase in average hourly earnings was more than offset by the increase in the CPI.
Inflation has intensified due to a number of factors, including supply chain bottlenecks, extraordinarily high demand as the Covid-19 pandemic eases, and comparisons of year on year at a time when the economy was struggling to reopen in the early crisis months.
Federal Reserve and White House policymakers expect current pressures to begin to ease, although central bank officials have acknowledged that inflation is higher and perhaps more sustainable than ‘they never expected.
Fed Chairman Jerome Powell will likely be asked for his opinion on inflation when he speaks Wednesday and Thursday to separate the House and Senate panels. Powell is convinced that inflationary pressures are mostly transient, although a Fed report on Friday indicated that upside risks are increasing.
“It increases the nervousness of some [Fed] members, ”House said. “We have already seen that they were more worried about inflation at the June meeting. If you analyze this, there are a number of areas where inflation is accelerating and has likely lasted. It will make some people nervous. “
Much of the price pressure has come from sectors particularly affected by the shutdown – used car prices, air fares and transportation costs, to name just three.
This was again the case last month, as prices for used cars and trucks jumped 10.5%, accounting for more than a third of all price index gains. For the 12-month period, prices for used cars and trucks increased 45.2%.
Food and energy prices also increased substantially, increasing by 0.8% and 1.5% respectively. The gasoline index rose 2.5% in June and 45.1% in the past 12 months. Food has increased 2.4% in the past year.
However, house and shelter prices continue to rise, fueling beliefs that inflation could persist for some time.
Housing accounts for almost a third of the CPI and is up 0.5% for the month and 2.6% from June 2020.
Consumers see prices rise 4.8% overall over the next 12 months, according to a New York Fed survey released on Monday, although a separate Bank of America survey released on Tuesday indicated that professional investors are more likely to believe that inflation will be temporary.
Become a smarter investor with CNBC Pro.
Get stock picks, analyst calls, exclusive interviews, and access to CNBC TV.
Sign up to start a free trial today.