U.S. CPI surges 5.4% in June Core CPI hits three-decade high

The U.S. CPI and core CPI in June were higher than expected and previous values, with a number of data reaching record highs.

The latest data released by the U.S. National Bureau of Statistics on July 13 showed that the U.S. CPI rose 0.9% in June from a year earlier, with an expected increase of 0.5% and a previous increase of 0.6%. U.S. June core CPI rose 0.9% YoY, expected growth of 0.4%, 0.7% previously. Anti-seasonal new high, the largest increase in 08 years.

U.S. CPI rose 5.4% year-over-year in June, compared with an expected increase of 4.9% and a previous increase of 5.0%. U.S. June core CPI rose 4.5% year-over-year, expected growth of 4.0%, the previous value of 3.8%. It is a 30-year high.

Specifically, the used car and truck index rose 10.5% in June, the third consecutive month of significant gains, which is the largest monthly increase in the used car and truck index ever. Used cars accounted for one-third of last month’s CPI increase.

In addition to this, there were a number of individual price indexes that declined.

The household goods and operations index fell 0.1% in June, following a 1.3% increase in May.
the health care index fell 0.1% in June, as it did in May, while component indices were mixed.
The Prescription Drug Index declined 0.2% in June following a 0.3% decline in May.

Market expectations for a Fed rate hike rose after the release of the jumping U.S. CPI data.

Stocks, bonds and bitcoin took a heavy hit.

The dollar was also able to soar.

Expectations of a Fed rate hike rose.

Spot gold pulled up about $10 in ten minutes before returning to the day’s lows.

U.S. federal funds rate futures also show a 90% probability of a Fed rate hike in December 2022 and a 100% probability of a rate hike in January 2023.

As for the reasons, Wall Street Insight has previously analyzed that the driving force behind the upward movement of CPI are mainly the following.

1, the rise in food and gasoline prices

Supply constraints, food producers cost-shifting pressure, the western states of the United States intensified the “drought” and other factors are together pushing up food prices in the U.S. market. U.S. media Business Insider published a list of the most serious shortages currently being experienced in the United States, these products include computer chips, palm oil, chicken, bacon and hot dogs, imported food (such as cheese, coffee and olive oil) and corn, and dozens of other supplies closely related to the U.S. economic life. In addition, the price of gasoline continues to rise, making the cost of transportation more expensive throughout the United States.

2、Wages of low-income workers have risen sharply

As current employment conflicts intensify, the latest signs of strong wage growth in the low-income sector are alarming: research by the Atlanta Fed shows that production and non-supervisory wages in the leisure and hospitality industry have risen 8.25% so far this year, with particularly strong wage increases for newly hired workers in the low-wage service sector. A survey by the New York Fed showed that workers earning less than $60,000 a year normally said they would have to pay 26 percent more than they did before the outbreak to take a job.

The Goldman Sachs study noted that labor-intensive, low-wage industries are shifting almost all of their labor costs to inflation. Every 1% increase in low-end wages will push core inflation up 5-15 basis points, and that’s still a modest degree, not even considering salary overruns.

3, new and used car prices continue to rise

According to research firm J.D. Power, about three-quarters of all vehicles sold in the U.S. in mid-June were priced at or above the U.S. automaker’s suggested retail price, a higher percentage than the 67% at the end of May. Manheim’s wholesale used vehicle value index continued to be 36 percent higher than a year ago during the same period, with its growth rate once exceeding 50 percent in April.

Overall, supply chain bottlenecks and labor shortages amid recovering demand remain the main drivers of increased inflationary pressures.