WASHINGTON -- Consumer prices rose in June from a year earlier at the fastest pace in more than six years, lifted by more expensive gasoline, car insurance, and higher rent.
The Labor Department said Thursday that the consumer price index ticked up just 0.1 percent in June. But inflation jumped 2.9 percent from a year earlier, the largest annual gain since February 2012. Core prices, which exclude the volatile food and energy categories, rose 0.2 percent in June and 2.3 percent from a year earlier.
The pickup in core inflation reflects continued upward pressure on services and some goods, with job gains and consumer spending steady and second-quarter economic growth in the gross domestic product projected to temporarily accelerate to 4 percent.
"When you look at the bigger components, there's modest pricing pressure overall," said Thomas Simons, an economist at Jefferies LLC. "There are some odd pockets here and there outside energy that were weak."
Solid economic growth and supply bottlenecks have pushed inflation past the Federal Reserve's 2 percent target, after price gains had languished below that level for six years. That is a key reason that Fed officials expect to raise short-term rates twice more this year.
Price gains may intensify if President Donald Trump makes good on his threat Tuesday to place tariffs on $200 billion of Chinese goods, including furniture, hats and handbags. If implemented, those duties, combined with tariffs put in place last week, would mean about half of China's imports would be subject to extra duties, likely driving prices higher for consumers.
Andrew Hunter, an economist at Capital Economics, said overall inflation may decline in the coming months as the recent gasoline price spikes level off. Prices at the pump averaged $2.88 a gallon nationwide Thursday, down 3 cents from mid-June. In Arkansas on Thursday, the average price of a gallon of gasoline was $2.61, up from $2.01 a year ago, according to auto club AAA.
"Nonetheless, with the labor market exceptionally tight and activity expanding strongly, we think that core inflation has further to rise," Hunter said in a research note. "The prospect of further tariffs on Chinese imports will only add to that upward pressure."
Household appliance prices rose in June from a year earlier at the fastest pace in five years, Hunter noted, lifted by a 13 percent increase in washing machine costs. Trump imposed tariffs on washing machines in January.
The Fed's preferred inflation gauge has increased at a slower pace, up 2.3 percent in the past year. But most economists expect the Fed will raise rates a total of four times this year as it attempts to keep inflation in check without cutting off growth.
With consumers and businesses spending more, trucking firms have struggled to hire enough workers to keep goods moving. That has boosted shipping prices, lifting costs for businesses that may soon be passed on to consumers.
In June, gasoline prices increased 0.5 percent and have risen 24.3 percent in the past 12 months. That has sent prices at the pump toward nearly $3 a gallon, sucking more money from consumers' wallets and offsetting roughly a third of the benefit from last year's tax cuts.
Fuel oil has surged nearly 31 percent in the past year, pressuring airlines. Delta cut its full-year profit outlook Thursday, citing a $2 billion surge in fuel prices. Airlines have tried to offset rising fuel costs in a number of ways, including additional charges for passenger services.
Rents rose 0.3 percent in June and overall housing costs have increased 3.4 percent in the past year. Auto insurance prices also increased 0.3 percent last month and have jumped 7.6 percent from a year earlier.
New and used cars and medical care have also become more expensive. Clothes and household furniture fell in price last month.
Thursday's consumer price index report showed hotel and motel rates fell 4.1 percent in June from the previous month, the biggest decline on record and dragging down the broader index by 0.037 percentage point. Other gauges of housing costs continued steady gains, with rent of primary residence and owners-equivalent rent both rising 0.3 percent.
Additional categories that helped lower the gain in the consumer price index included apparel, with a 0.9 percent decline, and other household equipment and furnishings, which dropped 1.7 percent.
A separate Labor Department report on Thursday showed average hourly earnings, adjusted for inflation, were unchanged on an annual basis for a second month. Wages, which feed into inflation pressures, remain weaker than economists had expected at this point in a tight job market. They're also rising more slowly than in previous expansions.
Information for this article was contributed by Christopher Rugaber of The Associated Press and by Katia Dmitrieva, Kristy Scheuble and Vince Golle of Bloomberg News.
Business on 07/13/2018