Strongest Inflation in 13 Years

The consumer inflation report came out this morning, and “transitory” may still be with us a little while longer.

Here are the details. Seasonally-adjusted inflation rose by 0.90% last month. That’s the fastest pace in 13 years. The seasonally-adjusted core rate rose by 0.88%.

“What this really shows is inflation pressures remain more acute than appreciated and are going to be with us for a longer period,” said Sarah House, senior economist for Wells Fargo’s corporate and investment bank. “We are seeing areas where there’s going to be ongoing inflation pressure even after we get past some of those acute price hikes in a handful of sectors.”

A separate report from the Labor Department’s Bureau of Labor Statistics noted that the big monthly hike in consumer prices translated into negative real wages for workers. Real average hourly earnings fell 0.5% for the month, as a 0.3% increase in average hourly earnings was more than negated by the CPI increase.

Inflation has been escalating due to several factors including supply-chain bottlenecks, extraordinarily high demand as the Covid-19 pandemic eases and year-over-year comparisons to a time when the economy was struggling to reopen in the early months of the crisis.

Policymakers at the Federal Reserve and the White House expect the current pressures to begin to ease, though central bank officials have acknowledged that inflation is stronger and perhaps more durable than they had anticipated.

Fed Chairman Jerome Powell likely will be asked for his views on inflation when he speaks Wednesday and Thursday to separate House and Senate panels. Powell has been steadfast that inflationary pressures are primarily transitory, though a Fed report Friday indicated that upside risks are increasing.

Over the last 12 months, headline inflation is up by 5.32%. That’s also the fastest pace in 13 years. Used car and truck prices comprised about one-third of the total CPI increase.

Over the last 12 months, core inflation has increased by 4.53%. That’s the fastest pace in 30 years.

Posted by on July 13th, 2021 at 11:04 am


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