(RTTNews) – Largely reflecting a sharp pullback in energy prices, the Labor Department released a report on Tuesday showing consumer prices in the U.S. decreased by much more than expected in the month of June.
The Labor Department said its consumer price index fell by 0.4 percent in June after climbing by 0.5 percent in May. Economists had expected consumer prices to edge down by 0.1 percent.
The pullback by the consumer price index marked the largest one-month decline since April 2020, when it slid by 0.8 percent.
The report also said the annual rate of consumer price growth slowed to 3.5 percent in June from 4.2 percent in May, coming in below economist estimates for a 3.8 percent jump.
The bigger than expected monthly decrease in consumer prices largely reflected the steep drop in energy prices, which plunged by 5.7 percent in June after surging by 3.9 percent in May. Energy prices were still up by 15.7 percent compared to the same month a year ago.
Meanwhile, the report said core consumer prices, which exclude food and energy prices, came in unchanged in June after rising by 0.2 percent in May. Economists had expected core prices to increase by another 0.2 percent.
The annual rate of growth by core consumer prices slowed to 2.6 percent in June from 2.9 percent in May, while economists had expected the pace of growth to slip to 2.8 percent.
Prices were unchanged on a monthly basis as lower prices for motor vehicle insurance, communication, apparel, medical care, and used cars and trucks were offset by higher prices for recreation, household furnishings and operations, and personal care.
“Today’s better than expected core reading gives the Fed breathing room in deciding whether and when to raise interest rates,” said Nationwide Chief Economist Kathy Bostjancic.
She added, “That all said, the renewed escalation of conflict in the Middle East and announced reimposition of a U.S. blockage has prompted a sharp reversal in oil and gasoline prices that introduces upside risk to our forecast.”
On Wednesday, the Labor Department is scheduled to release a separate report on producer price inflation in the month of June.
Economists currently expect producer prices to edge down by 0.1 percent in June after jumping by 1.1 percent in May, while the annual rate of producer price growth is expected to slow to 6.2 percent from 6.5 percent.
