Present US Inflation Hit 13-Years All Time High In June
- Stocks
Yaseer Rashid- 0
- 8 minutes read
The US inflation rate 2021 continued to increase in June at the fastest speed in the last 13 years and the recovery from the Covid-19 pandemic received steam and the demand of the consumers accelerated the prices for airline fares, autos, and other items.
The Labor Department asserted that the consumer price index of the last month accelerated to 5.4% from the previous year which is the highest 12 month rate since August 2008. So there have been such scenarios in the US inflation rate history. The core price index that does not include the often fluctuating categories of energy and food, increased 4.5% from the previous year.
The index acts as the US inflation calculator where it calculates what is being paid by the consumers for the goods and services that include groceries, clothes, recreational activities, restaurant meals, and vehicles. It increased by 0.9% from May till June which is the highest one month change from 2008.
In the previous month, the prices of second hand cars and trucks saw an increase of 10.5% that drove one third of the increase in the overall index according to the department, highlighting the third month of the huge increase in price despite a shortage of supply of vehicles. The index for apparels and airlines fares also rose sharply due to US inflation in this month.
What The Economists Have To Say On US Inflation?
Consumers are witnessing a rise in price for varied reasons as the recovery of the US economy picks up. According to economists, the main initiator of the US inflation in June was boosting demand that outpaced the ability of entities to keep up. Another factor according to the economists was the recovery in the price for hotels, air travel, rental cars, recreations, and entertainment. All those services that have been hit hard due to the prevailing pandemic. According to the economists,
“Demand is coming back very rapidly, and businesses are normalizing prices in the sense that they are making up for declines.”
Higher shipping costs and shortage of supply also prevail to bring in the rapid increase in goods inflation. Prices of the goods without including food and energy witnessed the two largest monthly hikes on record in May and also in April.
The rise in price reflects robust demand of consumers that has been increased with the widespread vaccination, trillion of dollars in the federal pandemic relief, the ending of many business restrictions, and a huge quantity of household savings. The increase in demand has enabled the employers to seek more workers and pay them more wages as they struggle to hire.
Investors are also keeping an eye on the semi-annual testimony of the Fed Chair Jerome Powell to Congress on both Wednesday and Thursday for more details on whether the Fed will inherit more aggressive actions to stop the rising US inflation. According to a strategist,
"This isn't surprising that the market is concerned about inflation, our view is still that most of it is transitory."
How Is The US Inflation Affecting The Price Of Essential Goods?
The GDP (gross domestic product) of the US increased 6.4% in the first quarter. Economists that have been surveyed by a journal in July expect the Department of Commerce to report that there has been a 9.1% increase in the annual rate in the second quarter.
The annual US inflation measurements have been boosted but comparing it with figures from the last year during the lockdown of Covid-19. This time the prices crashed as there were collapsing demands for many goods and services. This base effect is expected to accelerate the US inflation rate by year in June.
When compared with the data of two years back, the consolidated increase in price is by 3% in June. The overall took a huge leap at a 9.7% annual rate in three months that ended in June.
Much of the June increase was accelerated by the factors that have the chance to subside in the upcoming months which includes the shortage of semiconductor chips that is decreasing the supply of autos and the post reopening hike in the demand of the consumers. Increasing the prices for used and new cars and profits for lodging and transportation services that include truck and car rentals contributes to the core increase of CPI.
There are more companies that are passing on higher material and labor costs to their customers. There are many companies that are raising their prices for the first time this year as the demand increases following the business restrictions that are related to the pandemic.
The policy makers are looking at the reading of June to gauge the magnitude of what is expected to be several months of robust inflation after 1 year of anemic price pressure during the time when the pandemic is at peak. The main question of the US economy and the financial market is whether this US inflation is temporary or not. And the easy money policy by the Federal Bank aimed at providing aid to the US economy during this pandemic.
Conclusion
The current US inflation that was accelerated due to the prevailing pandemic is a real topic of concern. The employment opportunities have started to decrease and there is inflation despite the shortage of supplies of goods and services. Along with that, there is a sharp increase in the price of air tickets, hotels, and automobiles.
