US inflation rate reaches 9.1% for June, a new 40-year high

June brought the latest in a series of 40-year highs for inflation.

The monthly reading of the Consumer Price Index from the US Bureau of Labor Statistics showed a year-over-year increase of 9.1%. It was the largest 12-month increase since November 1981.

It showed inflation continuing its monthslong rise in 2022. The month-over-month increase in the CPI was 1.3%. This followed a 1% increase in May.

While the primary contributor was a 60% year-over-year spike in gas prices that was the highest since 1981, the food index was also among the most prominent drivers of the increase. It increased 1% in June following a 1.2% increase the prior month. An index that breaks out prices for food consumed at home rose 12.2% over the last 12 months, which was the largest increase since the period that ended in April 1979.

The core inflation rate, which leaves aside the volatile food and energy markets, was up 5.9% year-over-year, and 0.7% month-over-month, reflecting a “broad-based” increase in almost all of its measures. This included:

• Apparel rose 0.8% month-over-month in June, following a .7% increase in May.
• Personal care rose 0.4% month-over-month.
• Household furnishings rose 0.4% month-over-month, and 9.5% year-over-year.

In an effort to tame inflation, the Federal Reserve acted in June to raise interest rates by 0.75%, which was its highest increase since 1994. Even before Wednesday’s reading, there was an emerging consensus among economists that another hike is likely in July.

The Fed’s tools are designed to cool demand. But Federal Reserve Bank of San Francisco Senior VP of Economic Research Adam Hale Shapiro recently conducted an analysis that showed supply factors play a big role, accounting for half of the rise of current inflation. Demand factors, meanwhile, accounted for 30%, the analysis showed.

Consumers increasingly see supply issues behind rising prices, as well. A poll released recently by the Consumer Brands Association showed that consumers increasingly blamed supply chain issues for grocery inflation over the pandemic and other issues.

On the demand side, the current picture will come more fully into focus when the federal government releases the latest data for monthly retail sales on Friday.

The National Retail Federation focused its response to the news on actions that the administration of President Joe Biden and Congress can take.

"NRF consumer surveys and economic research indicate that consumers continue to modify their behavior and change spending patterns to adapt to price increases in a wide range of goods and services. But modified behavior and changed spending patterns alone aren’t sufficient to help offset price increases that impact households," said NRF President Matthew Shay, in a statement. “We need to support other policy measures that will lower costs, like the recent passage of the Ocean Shipping Reform Act for which we thank the administration and bipartisan congressional majorities for supporting. In addition, we encourage the administration to act quickly and remove China tariffs that cost American families more than $1,200 annually."