The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.9 percent in June on a seasonally adjusted basis after rising 0.6 percent in May, the US Bureau of Labor (BLS) Statistics reported. This was the largest 1-month change since June 2008 when the index rose 1.0 percent. Over the last 12 months, the all-items index increased 5.4 percent before seasonal adjustment; this was the largest 12-month increase since a 5.4-percent increase for the period ending August 2008.
The index for used cars and trucks continued to rise sharply, increasing 10.5 percent in June. This increase accounted for more than one-third of the seasonally adjusted all items increase. The food index increased 0.8 percent in June, a larger increase than the 0.4-percent increase reported for May. The energy index increased 1.5 percent in June, with the gasoline index rising 2.5 percent over the month.
Right now, this puts the economic recovery in a tricky situation. Policymakers expect this inflation to fade as the economy works through the volatile pandemic reopening period, but nobody knows exactly how long that will be. On the plus side, the US is seeing a manufacturing boom which will stabilize supply chains and pump localized economies. Yet, on the minus side getting people back to work remains a significant challenge.
All of this puts small businesses in a bind. Per NFIB’s recent survey, the net percent of owners raising average selling prices increased seven points to a net 47% (seasonally adjusted), the highest reading since January 1981. However, the NFIB Optimism Index increased 2.9 points in June to 102.5, the first time the Index exceeded 100 since November 2020. Seven of the 10 Index components improved and three declined.
So, really what we have is a mixed bag as we await moving further past the pandemic. There is plenty of optimism that we are experiencing a temporary rough patch based on a variety of factors. But until we are through it, consumers and small businesses must navigate a delicate situation.