Topline
Inflation sank to its lowest level since March 2021 last month, but a massive chunk of declining prices were attributable to one key input as a variety of items continue to grow more expensive.
Key Facts
Gas was the most notable component of the consumer price index to tumble down in price, declining 27% on an annual basis; the Labor Department’s energy index is down 27% over the last 12 months, driving nearly all of inflation’s slowdown.
Airfare was among the biggest decliners from May to June, tumbling nearly 7% in one month and falling 19% compared to 2022.
Also coming down in price were eggs, which are 8% less expensive than they were a year ago after a high-profile but brief surge in prices, and used cars, which are 5% less expensive than the year prior.
Overall, prices for items excluding food and energy are up almost 5% year-over-year.
Most significantly, rent and homeowners’ equivalent monthly payments jumped by 8% as it continues to grow costlier for Americans to put a roof over their heads thanks to sticky demand and surging mortgage payments.
Despite the tumble in used car and gas prices, other vehicle costs continue to spike, as car insurance is up 17% year-over-year and auto maintenance and repair fees are up 13% during the period.
Key Background
As the U.S. economy emerged from the worst of the pandemic, inflation roared to a more than 40-year high as prices surged across the board. Gas spiked to an all-time high last year following Russia’s invasion of Ukraine, hitting more than $5 per gallon nationally as crude oil prices surged before coming back down to earth. Moderating inflation has not come without a price, as it has coincided with a dramatic increase in interest rates, driving mortgages to their highest level in two decades.
Crucial Quote
“Inflation’s move lower highlights the fact that consumers are feeling less pressure at the pump and grocery stores,” Peter Essele, Commonwealth Financial’s head of portfolio management, wrote in emailed comments. “More disposable income translates to increased purchasing power for Americans, which is likely to translate into a surge in GDP in the second half of 2023.”
Inflation Slides To 2-Year Low—But Price Increases Stay Sticky (Forbes)
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