June Inflation Accelerates to 9.1%

Rising prices floored the accelerator instead of the brake in June, increasing 1.3% over the past month and a whopping 9.1% over the past year, according to the Bureau of Labor Statistics (BLS) release on Wednesday. BLS said the Consumer Price Index for All Urban Consumers (CPI-U) saw “the largest 12-month increase since the period ending November 1981,” over 40 years ago.

U.S. inflation has expanded beyond food and fuel prices. “Almost all major component indexes increased over the month,” with housing, vehicles, and medical care leading the way, BLS explained. “Among the few major component indexes to decline in June were lodging away from home and airline fares.” How strange for travel-related expenses to decline in June (the data are seasonally adjusted)! Could it be that would-be travelers are opting for cheaper vacations because they feel the pinch in their pocketbook?

The CPI data for June outpaced inflation from this spring — March (8.5%), April (8.2%), and May (8.6%) — which had already ushered in the highest inflation in 40 years. It also surpassed expectations; economists expected the 12-month inflation figure to reach 8.8%.

In response, America’s therapist-in-chief assured everyone who still pays attention to him that it’s not that bad. “While today’s headline inflation reading is unacceptably high, it is also out of date,” began the “President Biden Statement on CPI Inflation in June.” From overseas, President Biden assured the country, “tackling inflation is my top priority.”

If that language sounds eerily familiar, that’s because it is. President Biden wrote on May 30, “I have made tackling inflation my top economic priority.” An administration official explained to CNN, “For [the] month of June, we are just really communicating how in touch we are with what Americans are dealing with and how it’s our number one economic priority.” Not only is it worse than previous months, but it’s worse than economists predicted.

Unfortunately, the rhetoric does not match the reality. Throughout 2021, the administration dismissed rising inflation concerns to justify their (failed) push for a massive spending package. Last year, on July 19, President Biden invoked unnamed experts and data to declare that “most of the price increases we’ve seen are … expected to be temporary.” On December 10, he opined that inflation had reached “the peak of the crisis.” Those prognostications were absurd at the time and now are too painful even to be humorous.

More recently, President Biden has refused to take responsibility for inflation, blaming alternately on Putin’s invasion of Ukraine, the Republican minority in Congress, or the Federal Reserve Board. In response to June’s numbers, the White House’s revolving door of lame excuses has finally (please let it be final) ushered in the silliest defense of all: blaming the data themselves. White House Press Secretary Karine Jean-Pierre first raised the “out-of-date” talking point on Tuesday, before the numbers were officially released. The premature attempt to set the narrative indicates that the White House understands how damaging the numbers are.

By calling the data “out of date,” President Biden and his staff mean that June’s CPI figure reflects a month that has already ended, a necessary prerequisite for non-time-travelers to compile objective data. The slight relaxation in fuel prices they point to in the first week of July could just as quickly reverse itself. Like every other monthly CPI release, June’s figures provide the most recent statistical evidence to show whether subjective or anecdotal perceptions of prices accurately represent the broader picture. In other words, President Biden is stating the obvious in an attempt to undermine the credibility of a widely-accepted official data collection, simply because the results show bad economic news on his watch.

But President Biden (and the American people) may have found one nugget of good news in the inflation report. Core inflation, which measures all items except food and energy, declined slightly to 5.9% over the past 12 months. That is still “unacceptably high,” to use the president’s own term, but it is headed in the right direction. That could show that core inflation is responding to the Federal Reserve’s June 15 decision to increase interest rates by 0.75%, the largest increase since 1994.

Not that the Federal Reserve has been very aggressive about beating back inflation. Their own benchmark, the federal-funds interest rate, is still an order of magnitude lower than the interest rate that was required to quench inflation in the early 1980s. However, those high interest rates sparked a recession, something the current Federal Reserve Board is energetically trying to avoid. A proportional analogy might be: fearful of flooding the bathroom, the Fed is trying to flush a toilet by dumping in water one tablespoon at a time — but at least they’re no longer using a teaspoon.

We may be in a recession already, which requires two consecutive quarters of negative economic growth. America’s GDP decreased 1.6% for the first quarter of 2022, according to the Bureau of Economic Analysis (BEA). For the second quarter of 2022, the Atlanta Federal Reserve predicts a GDP decrease of 1.2%, although we won’t know for sure until the BEA releases its advance estimate on July 28.

Causing a recession without curbing inflation: not a great look for President Biden’s “top economic priority.” One thing is for sure — come November’s midterm elections, voters will weigh in on whether 9.1% price increases are a top priority for them.