Prices for U.S. consumers jumped in June by the most in 13 years, extending a run of higher inflation and fueling concerns that the rapidly rebounding economy is making goods and services increasingly expensive.
Tuesday's report from the Labor Department showed that consumer prices in June rose 0.9% from May and 5.4% over the past year — the sharpest 12-month inflation spike since August 2008. Excluding volatile oil and gas prices, so-called core inflation rose 4.5% in the past year, the largest increase since November 1991.
The pickup in inflation, which has coincided with the economy’s rapid recovery from the pandemic recession, has heightened concerns that the Federal Reserve might feel compelled to begin withdrawing its low-interest rate policies earlier than expected.
If so, that would risk weakening the economy and potentially derailing the recovery. Fed officials have repeatedly said, though, that they regard the surge in inflation as a temporary response to supply shortages and other short-term disruptions as the economy quickly bounces back.
The jump in prices stems in many cases from a shortage of components and goods throughout the economy, from semiconductors to used cars, as well as surging demand from consumers who are increasingly traveling, shopping and eating out — and too few workers to serve them. Wages have increased sharply as a result, along with restaurant meals, airline fares and hotel rates.
Last month alone, average used car prices soared 10.5% — the largest such monthly increase since record-keeping began in January 1953. That spike accounted for about one-third of the monthly increase for the third straight month.
Hotel room prices soared 7% in June. And the cost of new cars leapt 2%, the biggest monthly increase since May 1981. Auto prices have soared because the shortage of semiconductors has forced car makers to scale back production.
Restaurant prices rose 0.7% in June and 4.2% in the past year, a sign that many companies are raising prices to offset higher labor costs.
So far, investors have largely accepted the Fed's belief that higher inflation will be short-lived, with bond yields signaling that inflation concerns on Wall Street are fading. Bond investors now expect inflation to average 2.4% over the next five years, down from 2.7% in mid-May.
Americans' longer-term views on inflation have also leveled off. A survey by the Federal Reserve Bank of New York, released Monday, found that consumers expect inflation to remain near 5% a year from now. But they expect inflation to be 3.5% three years from now, down slightly from last month. Consumers typically overestimate future inflation.
The public's expectations of inflation are important, because they can be self-fulfilling. If consumers foresee higher prices, they are likely to demand higher pay, and businesses will try to charge more to offset their higher costs.
The Fed is aiming for inflation to exceed its target of 2% for some time to make up for the fact that inflation fell below that level for most of the past decade. The Fed wants inflation to average 2% over time to prevent Americans' inflation expectations from falling too low.
A big-screen adaptation of the anime “Chainsaw Man” has topped the North American box office, beating a Springsteen biopic and “Black Phone 2.” The movie earned $17.25 million in the U.S. and Canada this weekend. “Black Phone 2” fell to second place with $13 million. Two new releases, the rom-com “Regretting You” and “Springsteen — Deliver Me From Nowhere,” earned $12.85 million and $9.1 million, respectively. “Chainsaw Man – The Movie: Reze Arc” is based on the manga series about a demon hunter. It's another win for Sony-owned Crunchyroll, which also released a “Demon Slayer” film last month that debuted to a record $70 million.
The Federal Aviation Administration says flights departing for Los Angeles International Airport were halted briefly due to a staffing shortage at a Southern California air traffic facility. The FAA issued a temporary ground stop at one of the world’s busiest airports on Sunday morning soon after U.S. Transportation Secretary Sean Duffy predicted that travelers would see more flights delayed as the nation’s air traffic controllers work without pay during the federal government shutdown. The hold on planes taking off for LAX lasted an hour and 45 minutes and didn't appear to cause continued problems. The FAA said staffing shortages also delayed planes headed to Washington, Chicago and Newark, New Jersey on Sunday.
Boeing workers at three Midwest plants where military aircraft and weapons are developed have voted to reject the company’s latest contract offer and to continue a strike that started almost three months ago. The strike by about 3,200 machinists at the plants in the Missouri cities of St. Louis and St. Charles, and in Mascoutah, Illinois, is smaller in scale than a walkout last year by 33,000 Boeing workers who assemble commercial jetliners. The president of the International Association of Machinists says Sunday's outcome shows Boeing hasn't adequately addressed wages and retirement benefits. Boeing says Sunday's vote was close with 51% of union members opposing the revised offer.
The stunning indictment that led to the arrest of more than 30 people — including Miami Heat guard Terry Rozier and other NBA figures — has drawn new scrutiny of the booming business of sports betting in the U.S. The multibillion-dollar industry has made it easy for sports fans — and even some players — to wager on everything from the outcome of games to that of a single play with just a few taps of a cellphone. But regulating the rapidly-growing industry has proven to be a challenge. Professional sports leagues’ own role in promoting gambling has also raised eyebrows.
Tesla, the car company run by Elon Musk, reported Wednesday that it sold more vehicles in the past three months after boycotts hit hard earlier this year, but profits still fell sharply. Third-quarter earnings fell to $1.4 billion, from $2.2 billion a year earlier. Excluding charges, per share profit of 50 cents came in below analysts' estimate. Tesla shares fell 3.5% in after-hours trading. Musk said the company's robotaxi service, which is available in Austin, Texas, and San Francisco, will roll out to as many as 10 other metro areas by the end of the year.
Starbucks’ AI barista aims to speed service and improve experience. Nick Lichtenberg, Fortune Business Editor, explains its impact on workers and customers.
As Big Tech reports Q3 earnings, investors await proof that massive AI and cloud investments from Meta, Apple, Microsoft, and Alphabet are driving real growth.
Eric Trump joins us to discuss American Bitcoin’s mission, market strategy, and why he believes the U.S. must lead the next era of digital currency innovation.
