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WASHINGTON-U.S. Consumer prices rose for a third consecutive month in June, dampening modest wage gains and bringing inflation to its highest level in more than six years.
The consumer price index measures what Americans pay for baby clothes, rose 0.1% seasonally adjusted in June from the previous month, the Labor Ministry said Thursday. Excluding volatile food and energy components, prices rose 0.2%. Economists surveyed by the Wall Street Journal were expecting an increase of 0.2% from May for both the overall index and so-called basic inflation.
Last month's price increases lifted cumulative CPI growth in June to 2.9%, its highest level since February 2012. Underlying inflation reached 2.3 % in June compared to the previous year.
For a second consecutive month, annual inflation fully offset the growth in average hourly wages in June, leaving real hourly wages of workers at a stable level year-over-year. despite a decline in unemployment and a generally strong economy. Production and non-supervisory employees, a category that includes blue-collar workers, saw their real hourly wage drop 0.2% in June from the previous year after a similar slide in May.
"This is the metaphor of Hall Frog, a 58-year-old communications specialist in Rockville, Maryland. "You notice it a little bit at a time, here and there, and then at the end of the year, you say," Yeah, things have gone up a lot, is not it? "
Hall stated that even though he received a 2% salary increase last year, he feels that his income has not kept up with the cost of living, adding : "It's a net loss."
While workers made up for prices by working a little more hours a week, the stagnation of Americans' buying power highlights questions about the extent to which workers are benefiting from an economy that, by many other measures, is booming.
Economists estimate that gross domestic product increased in the second quarter 39, one of the fastest hikes measured since the recession, while the corporate tax cuts at the end of 2017 likely fueled earnings rec US listed companies. "Wage growth remains surprisingly low," said David Kelly, chief strategist at JP Morgan Asset Management, in a memo to customers earlier this week. "The remarkable ability of companies to attract more workers to the labor market and to achieve higher productivity gains without raising wages is clearly positive for profits."
The rise in prices from one year to the next, following a sharp rise in oil prices in early spring. The CPI report indicates that gasoline prices rose 0.5% in May from the seasonally adjusted average in May and 24% from the previous year. Separate data from the US Energy Information Administration showed that the average price of a gallon of regular gasoline rose to $ 2.89 last month, the highest price since June 2014.
Prices for other goods and services also increased.
Housing and leasing costs, which account for about one-third of overall consumer spending, rose 0.1% in June from May and rose 3.4% over the same period last year. last year. Medical services were up 0.5% from May and up 2.5% from June 2017. Food prices rose 0.2% in May, although the annual increase in category was more moderate by 1.4%
. suggests that the economy behaves more or less as it should after years of unrestrained expansion that has brought the unemployment rate near its lowest levels since the 1960s. A separate measure of the economy. inflation, favored by the Federal Reserve, the price index of personal consumption expenditure, reached 2.3% in May, the highest annual rate in six years and 0.3 percentage point higher than the goal of the central bank. has reinforced the arguments of Fed officials in favor of the gradual rise in interest rates in the short term to prevent the overheating of the economy. They have increased rates twice this year and have scored two more increases by the end of the year.
At their last rate setting meeting, in June, Fed participants were generally of the opinion that economic expansion was progressing as expected, the actual economic activity going on. being well developed, with the labor market conditions continuing to strengthen and inflation close. the purpose of the Committee, "according to the minutes published last week.
Economists said Thursday's data generally supported their view that inflationary pressures are gradually improving.
But a key question in the future is to know where the Trump administration will take its trade dispute with China. The White House, which has imposed duties on $ 34 billion of Chinese exports of industrial goods such as auto parts and electronic components, announced this week that it would badess tariffs of 10% on 200 billion additional dollars of Chinese consumer goods. According to the economists, if they were to come into force, they would not be negligible.
Ian Shepherdson,
chief economist at Pantheon Macroeconomics, said the goods subject to the proposed tariffs represent nearly 6% of the core CPI, which means that a 10% levy would raise the index of 0 , 6 percentage point.
"The Fed can not back down and ignore a blow of this size, given the tightness of the labor market," said Shepherdson in a note to clients dated Thursday. "People will be looking for to be compensated for squeezing their real incomes because of rising prices, and their chances of forcing employers to pay are better today than at any other time since the crash. "
Write to Paul Kiernan at [email protected]
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