Consumer Prices Rise 1.1% in June
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WASHINGTON — Prices for a quart of milk, a plane ticket, and a host of other products rose in June at nearly the fastest pace in a generation — yet another economic shock wave that alarmed analysts and took a bite out of the buying power of Americans.
Consumer prices rose 1.1% in June from the month before, far faster than the expected rate of 0.7% and almost double the reading from May, the Labor Department said today.
The only time in the past quarter-century that monthly inflation has been that high was in September 2005, when prices jumped 1.3%, mostly because Hurricane Katrina shut down oil refineries and energy prices spiked.
Consumer prices are up 5% over the last 12 months, the fastest one-year change since 1991.
As prices rose last month, take-home pay took a hit. Adjusting for inflation, weekly wages fell 0.9% in June, the third straight monthly decline and the biggest drop in almost four years.
The news was the back half of a one-two punch on inflation. Yesterday, the Labor Department reported that prices at the wholesale level were rising by the highest annual rate in 27 years.
Before Congress, the Federal Reserve chairman, Ben Bernanke, wrapped up two days of testimony and repeated his concerns about inflation, also noting the housing slump, financial turmoil, and credit troubles.
“We will work our way through these financial storms,” he said.
The Consumer Price Index, which came out today, measures not just what Americans pay for goods but for other purchases, including services like health care and haircuts.
Higher energy costs led the way, with a more than 10% rise in gasoline prices. More expensive vegetables, dairy, and beef pushed up food costs.
Core inflation, the figure that excludes energy and food to measure other costs, rose by 0.3% in June, the fastest rise since January. Airline tickets grew almost 5% more expensive, the biggest rise since the summer of 2001.
The report illustrates just how quickly prices are rising — not that the economic squeeze is anything new to most Americans.
An elementary school reading specialist from Springfield, Ill., Marsha Marvel, 45, said she had created a weekly household budget to hold down expenses and the family was cutting back on trips and restaurant meals to save.
“This summer, I feel like I’m paying $10 into my gas tank every day, so we’ve really had to change our budget,” she said. “We’re just watching our money so much more closely than before.”
A Des Moines, Iowa, hairstylist, Carla Civitate, 50, said she and her husband were also struggling with the soaring gas prices.
“We’ve adjusted our driving styles a lot with gas prices,” she said, even though one of their two cars is a hybrid. “I just basically drive to work and home and we try to do our errands en route.”
On Wall Street, the inflation report was tempered by falling oil prices. The Dow Jones industrial average rose 276 points, the biggest one-day jump in three months. Oil prices are still about 80% higher than they were a year ago.
The Fed released the minutes of its June 24-25 meeting, revealing officials were worried then about inflation and believed their next move would be to raise interest rates.
That would follow a period of aggressive rate cuts that were designed to keep the economy from sinking into recession because of problems in the housing market and the financial industry.
Still, private economists said they believed the Fed will not seriously contemplate a rate hike for many more months, worried about upsetting the fragile economy.
In Congress, Democrats seized on the inflation report to push a second economic stimulus package because the inflation risk is crimping the Fed’s room to cut interest rates farther.
“We’re now seeing danger for the economy on both sides — growth is too slow and inflation is too high,” said Senator Schumer. He called for “mainstream, bipartisan solutions for our economy.”
The White House press secretary, Dana Perino, said President Bush was “very concerned about the impact high prices are having on Americans, especially those who are on lower incomes.”
But the administration did not signal any increased willingness to consider another stimulus package beyond the $168 billion measure that is delivering payments to 130 million households.
Separately, the Federal Reserve said that industrial production rose by 0.5% in June, the best showing in nearly a year. Economists that primarily reflected the end of a strike at auto parts supplier American Axle, and forecast the rebound would be short-lived.
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Associated Press reporters Ashley M. Heher in Chicago and David Pitt in Des Moines contributed to this report.