June Consumer Price Index Shows Biggest Drop In Six Years

The Consumer Price Index declined 0.4 percent from May, according to figures released Tuesday by the Department of Labor. It was the largest monthly decrease since 2020. Compared with June of the previous year, consumer prices were 3.5 percent higher.

The report was considerably better than economists had expected. Forecasters had predicted that prices would fall by just 0.1 percent after increasing 0.5 percent in May. They had also projected an annual inflation rate of 3.8 percent, down from 4.2 percent the previous month.

Core prices, which exclude the more volatile food and energy categories, were unchanged from May. That was the strongest monthly reading since January 2021. Over the past year, core inflation increased 2.6 percent.

The recent trend also suggests that inflation has continued to move closer to the Federal Reserve’s preferred range. Based on the rounded monthly figures, overall consumer prices rose at an annualized rate of about 2.8 percent during the past three months. Core prices increased at an annualized rate of roughly 2.4 percent over three months and 2.6 percent over six months.

Lower energy costs were the biggest reason for the June decline. Energy prices dropped 5.7 percent after rising 3.9 percent in May, 3.8 percent in April, and 10.9 percent in March.

Gasoline prices fell even more sharply, declining 9.7 percent for the month. That followed increases of 7 percent in May, 5.4 percent in April, and 21.2 percent in March. The reversal provided noticeable relief to consumers after several months of rising costs at the pump.

Food prices continued to increase, though at a relatively modest pace. Grocery prices rose 0.2 percent in June and were 2.7 percent higher than a year earlier. Prices at restaurants also climbed 0.2 percent for the month and were up 3.4 percent over the past year.

Core goods prices, which exclude food and energy, declined 0.2 percent. They were only 0.8 percent higher than a year ago, suggesting that inflation for many physical products remained subdued.

Prices for services excluding energy-related services were unchanged in June and rose 3.2 percent over the previous 12 months. Services excluding shelter costs fell 0.2 percent, the best monthly result since January 2021.