What does the CPI inflation report for June mean?
The highest inflation seen in the US for 41 years was recorded in June. What does this mean for consumers and what are th worst affected items?
It’s another month of bleak economic news for Americans. Building upon May’s 8.6 percent increase, June has exceeded expectations to deliver a staggering 9.1 percent interest rate. This makes it the fastest increase in 41 years and it could continue to increase.
While the raw data looks bad, the price increases are nearly all driven by aspects outside of governemnt control: oil, fuel, and gas. While the government could expand US production, this is not a quick fix and would take many months before the feelings were felt.
Which price increases have been worst hit?
The high inflation has been led nearly totally by energy prices. Fuel and gasoline are the two most expensice commodities, rising 98.5 percent and 59.9 percent over the last year. This has a knock on effect on all other products due to shipping and manufacturing costs.
Despite this, the average price of gasoline has fallen, dropping from around $5 in early June to $4.65 this week. So while this has fallen, the previous higher price’s knock on effect is now reflected in the CPI data. An example of this is food costing 12.2 percent more since last June, though this also has another factor behind it.
CEO Charlie Bilello also notes that rent and house prices have not been well mapped in the inflation data as both are far higher than supposed, compared to last year.
Why are these commodities more expensive compared to everything else?
The central driver of the increases in fuel and food prices is the war in Ukraine. Sanctions against Russia from the US and NATO nations have prevented one of the world’s largest natural gas producers from its largest market.
Another problem coming out of the war is its effect on food prices. Ukraine is one of the largest exporters of sunflower oil, 42 percent, and grain, 12 percent on average, in the world, meaning the blockade of its exports impacts prices globally.
Alongside the war, oil companies have been keeping profits higher than ever while charging Americans more and more. In one example, profit estimates from Exxon, the US’s largest oil producer, are set to hit $16.8 billion for the next quarter. Companies are making more than ever from the inflation crisis, while ordinary people are paying the price.