Falling gasoline, energy, vehicle insurance, apparel and technology prices pushed inflation well below economists’ forecasts in June, while core consumer prices were unchanged from May.
By yourNEWS Media Newsroom
Consumer prices posted their steepest monthly decline in six years in June as sharply lower gasoline and energy costs combined with easing inflation across several major categories, according to figures released Tuesday by the Department of Labor.
The consumer price index fell 0.4% from May, substantially outperforming economists’ forecast for a 0.1% decline. The monthly decrease was the largest recorded since 2020 and followed a 0.5% increase in May.
Prices remained 3.5% higher than they were one year earlier. Economists had expected the annual inflation rate to come in at 3.8%, down from 4.2% in May.
The report also showed significant progress in underlying inflation. Core consumer prices, which exclude the more volatile food and energy categories, were unchanged from the previous month. That represented the strongest monthly core inflation reading since January 2021.
Core prices increased 2.6% over the preceding 12 months.
Based on the rounded monthly figures, overall consumer prices increased at an annualized rate of approximately 2.8% during the past three months. Core inflation ran at an annualized rate of roughly 2.4% over three months and 2.6% over six months.
Energy was the largest contributor to the June decline. Energy prices dropped 5.7% after increasing 3.9% in May, 3.8% in April and 10.9% in March.
Gasoline prices fell 9.7% during June, reversing several months of substantial increases. Gasoline had risen 7% in May, 5.4% in April and 21.2% in March.
Food prices continued to rise modestly. Grocery prices increased 0.2% from May and were 2.7% higher than a year earlier.
Prices for meals purchased at restaurants and other dining establishments also rose 0.2% during the month. Dining-out costs were up 3.4% over the previous year.
Core goods prices, which exclude food and energy, declined 0.2% in June. Prices in that category were only 0.8% higher than they were 12 months earlier, indicating limited inflation among physical consumer products outside the energy and food sectors.
Services prices excluding energy-related services were unchanged during the month and increased 3.2% from a year earlier.
A narrower measure of services inflation that excludes shelter costs declined 0.2%, producing its most favorable reading since January 2021.
Vehicle prices were largely stable or lower. Prices for new cars and trucks were unchanged in June and were up 0.5% over the previous year.
Used car and truck prices declined 0.2% during the month and were 2.1% lower than they were a year earlier.
Motor vehicle insurance costs fell 2%, providing additional relief in a category that has contributed to household transportation expenses.
Apparel prices dropped 0.6%, while medical care prices declined 0.1%.
Shelter inflation, one of the most persistent contributors to the overall price index, showed its smallest monthly increase in more than five years. Shelter costs rose 0.1% in June and were 3.3% higher than a year earlier.
Rent increased 0.1% during the month. The index measuring the estimated cost of homeownership rose 0.2%.
Prices also declined for commonly purchased technology products despite concerns that demand for artificial intelligence chips could raise the cost of consumer electronics.
Computer prices fell 0.7% in June, while smartphone prices declined 0.8%.
The broad-based slowdown was considerably stronger than economists had anticipated and could influence the Federal Reserve’s interest-rate deliberations this summer.
Financial markets had been assigning a significant probability to an interest-rate increase at the Fed’s meeting later in July. Several Federal Reserve officials had indicated that another unexpectedly strong inflation report could provide justification for raising rates.
The June figures instead showed outright monthly deflation in the headline index and no increase in core prices, potentially removing the immediate basis for a summer rate hike.
The limited increase in core goods prices also showed little evidence in the June report that President Donald Trump’s tariffs had produced widespread consumer price increases.
Democrats repeatedly described tariffs as a national sales tax during the 2024 presidential campaign. The new inflation figures challenge predictions that the trade measures would quickly result in broad price increases for American consumers, although the report reflects one month of consumer price data.
The June release showed declines across energy, gasoline, used vehicles, automobile insurance, apparel, medical care, computers and smartphones. Shelter inflation slowed to its lowest monthly pace in more than five years, while service prices excluding energy were unchanged.
Food remained one of the categories still recording monthly increases, though both grocery and dining-out prices rose by a comparatively modest 0.2%.
Taken together, the figures showed a pronounced cooling of inflation following May’s increase, with the monthly consumer price index posting its largest decline since 2020 and core inflation registering its strongest reading since early 2021.
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