C.P.I. Seen Climbing 4.9 P.c in June

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Economists expect a key indicator of inflation to rise rapidly for a third month in June, a gain that could keep concerns about rising prices in the center of attention in the White House and the Federal Reserve.

The consumer price index, the Department of Labor’s measure of how much consumers pay for purchases such as rent and plane tickets, rose 4.9 percent in the year through June, according to a forecast by economists surveyed by Bloomberg. That would mean the rate of increase has slowed slightly – it was 5 percent in the year to May – but remained high, supported by consumer demand as the economy reopened and a quirk in the data.

Investors, lawmakers and central bank officials are watching the changes closely. Rapid price hikes can put pressure on consumers if wages don’t keep up, and if they seem sustainable it could lead the central bank to withdraw support to the economy. The central bank’s cheap monetary policy is generally good for markets, so a quick exit would be bad news for investors in stocks and other asset classes.

Policy makers believe inflation will ease as the economy goes through a volatile and unprecedented pandemic reopening period, but how quickly this will happen is unclear. Prices have risen faster than Fed officials forecast earlier this year, some indicators of consumer inflation expectations are starting to rise – a factor that could make inflation a self-fulfilling prophecy – and some central bank officials are increasingly suspicious of that Changes.

Here’s what to see when the report comes out at 8:30 a.m.

Monthly data:

  • The CPI is said to have risen by 0.5 percent compared to May, according to the Bloomberg poll on Monday afternoon. That would be slower than the increase of 0.6 percent compared to the previous month.

  • Excluding volatile food and fuel prices, the CPI likely climbed 0.4 percent, up from 0.7 percent the previous month.

Annual data:

  • The CPI is expected to have risen 4.9 percent in the year through June, slower than the 5 percent in the year through May.

  • Excluding volatile food and fuel prices, the CPI was likely 4 percent higher last year, from 3.8 percent in the year through May. That would be the fastest pace since 1992.

Car prices, rents and restaurants

  • Used car prices have risen thanks to a semiconductor shortage that has slowed auto production, and June may have marked the end of that trend, Goldman Sachs economists wrote in a preview note.

  • Another area to consider is the cost of accommodation: rent and a rental equivalent for condominiums have solidified. Since they account for almost a third of headline inflation, this strengthening could be of great significance for future price gains.

  • The “Eating out” category could also be interesting. Restaurants have seen a surge in demand despite having difficulty hiring, and many have raised wages to attract workers. You can try to pass these costs on.

The base effect and personal consumer spending

  • The “base effect” is a bizarre way of saying that the price gains last year seem artificially high due to the price decline last year. The quirk was most extreme in May. It should ease slightly on the June data, although it remains a factor in the above-average increase.

  • Analysts are watching the CPI closely because it’s more recent, but the Fed is actually aiming for a related but different index when it comes to its average inflation target of 2 percent. This measure, the index of personal consumption expenditure, tends to be somewhat lower. It has also accelerated this year.