By Susan A. Baird
PBN Web Editor
WASHINGTON – Consumer prices outpaced expectations for the second month in a row, surging in June to their sharpest one-month rise since 2005 as fuel and food prices continued to soar, according to today’s report from the U.S. Department of Labor, Bureau of Labor Statistics.
The nationwide Consumer Price Index for All Urban Consumers (CPI-U) rose a seasonally adjusted 1.1 percent last month compared with May, the BLS said. The June gain followed increases of 0.6 percent in May (READ MORE), 0.2 percent in April and 0.3 percent in March.
Analysts had expected the CPI-U to rise 0.7 percent in May, based on the median forecast from a Bloomberg News survey of 79 economists. (Their estimates called for gains of 0.2 percent to 1.1 percent.)
The CPI-U’s core index excluding food and energy rose 0.3 percent in June – exceeding the survey’s 0.2-percent projection – after rising 0.2 percent in May, 0.1 percent in April and 0.2 percent in March. Increases were seen in every category, even clothing (0.1 percent), which fell in three of the previous four months. Transportation costs rose 3.8 percent; housing rose 0.5 percent, as did education and communication; other goods and services rose 0.4 percent; medical costs rose 0.2 percent.
The food component of the CPI-U increased 0.8 percent last month, nearly tripling May’s 0.3-percent increase, but still lagged April’s 0.9-percent monthly gain.
The energy index surged 6.6 percent in June after rising 4.4 percent in May and holding steady in April. The index rose at a 2.3-percent annual rate in the first half of the year, lagging its 2007 gain of 2.4 percent.
In the Northeast, the CPI-U rose to 232.649 points (December 1977 = 100) in June, an increase of 1.1 percent from the month before, after rising 0.9 percent in May and 0.5 percent in April. Compared with June 2007, the regional index rose 5.0 percent; fuel and utility costs in the Northeast rose 17.9 percent, food rose 4.8 percent and housing rose 3.9 percent year-over-year.
The nationwide CPI-U rose 5.0 percent compared with May 2007 to 218.815 points (1982 to 1984 = 100). The year-over-year increase – the sharpest since May 1991, Bloomberg said – followed 12-month gains of 4.2 percent in May, 3.9 percent in April and 4.0 percent in March.
The core CPI-U rose 2.4 percent year-over-year in June, after posting 2.3-percent gains in May, April and March. Energy prices rose 24.7 percent year-over-year, after rising 17.4 in May and 15.9 percent the month before. Food prices nationwide rose 5.3 percent, accelerating from the 5.1-percent pace of May and April.
For the first half of 2008, the CPI-U rose at a seasonally adjusted annual rate of 5.5 percent, accelerating from its 2007 gain of 4.8 percent. The core index rose at a seasonally adjusted 2.3-percent rate, lagging last year’s 2.4-percent gain. The food index rose at an 8.7-percent rate in the first half, compared with its 5.6-percent increase in all of last year. The energy index surged at a 29.1-percent rate in the year’s first six months – led by gasoline and other energy commodities – after rising 17.4 percent in 2007.
Meanwhile, the BLS said in a separate report, U.S. production and nonsupervisory workers’ real earnings – average weekly earnings adjusted for inflation – fell in June for the third month in a row.
Real average weekly earnings fell a seasonally adjusted 0.9 percent in June – after falling 0.7 percent in May and 0.1 percent in April – as average hourly earnings rose (+0.3 percent) but failed to keep pace with the increase in the CPI-W (+1.2 percent). Average weekly hours were unchanged last month.
Compared with June 2007, average weekly earnings rose 2.8 percent – to $613.12 last month from $588.88 a year earlier – but real earnings adjusted for inflation fell 2.4 percent, after declining 1.1 percent in May and 0.7 percent in April.
“This is a problem for the economy; it’s even worse for the Fed,” Joel Naroff, president of Naroff Economic Advisors Inc. in Holland, Pa., told Bloomberg News. “Inflation numbers are high enough that, under different circumstances the Fed would be hiking rates,” Naroff said. “But given the state of the economy, [it can’t].”
The minutes of the policymaking Federal Open Market Committee will be released by the Federal Reserve this afternoon at www.federalreserve.gov.
Additional information, including the latest Consumer Price Index report, is available from the U.S. Department of Labor’s Bureau of Labor Statistics at www.bls.gov/cpi; the five-page Real Earnings report can be found at www.bls.gov/ces.
