Food is a factor in inflation double whammy
Wholesale prices rocketed by a near-record 11.3% for the year ending in June, said the Labor Department on Thursday, a day after it reported that consumer prices had soared 9.1% during same period. Food was an inflationary factor in both reports, although some analysts saw signs that the momentum for higher prices was easing.
The so-called core inflation rate, which excludes volatile food and energy prices, was 6.4% for the past 12 months, down from the previous month, according to the Producer Price Index, which measures wholesale prices. In the Consumer Price Index, the core rate was down for the third month in a row, to 5.9%.
Food prices ballooned by 10.4% in the year ending in June, said the CPI report. It was the 13th month in a row the food inflation rate has accelerated since it measured a modest 2.2% in May 2021. The Labor Department said food, housing, and gasoline were the largest contributors to the U.S. inflation rate, as measured by the new CPI report. Housing and food are the two largest consumer expenses. Petroleum was the dominant factor in the PPI increase. Prices for chickens also increased at the wholesale level, but prices for eggs plunged 30%.
With the decrease in the core CPI rate, the inflation picture should be “much better” in coming months, said Mark Zandi, chief economist for Moody’s Analytics, on social media. “But getting inflation consistently back down to the Fed’s 2% target will take a good 18-24 months. The biggest impediment will soon be the strong rent growth.”
“While today’s headline inflation reading is unacceptably high, it is also out of date,” said President Biden on Wednesday. The Bureau of Labor Statistics gathers price data each month for the inflation report that is released midway through the following month.
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“Today’s data does not reflect the full impact of nearly 30 days of decreases in gas prices that have reduced the price at the pump by about 40 cents [per gallon] since mid-June,” said Biden. “And other commodities like wheat have fallen sharply since this report.”
Futures prices for corn, soybeans, and wheat have gone down substantially in recent weeks; the Bloomberg Commodity Index, which gauges grains, metals, and petroleum futures prices, was 18% lower on Thursday than in mid-June. The USDA softened its projections of season-average prices for this year’s corn, soybean, and wheat crops in the July WASDE report, though they were still at record or near-record levels.
Inflation has been a headache throughout the industrialized world. In May, driven largely by food and energy prices, it was 9.6% among members of the Organization for Economic Cooperation and Development, the highest since August 1988. Food inflation in OECD nations averaged 12.6% in May.