An inflation gauge that is closely tracked by the Federal Reserve jumped 6.8% in June from a year ago, the biggest increase in four decades, and leaving Americans with no relief from surging costs.
Friday's figures from the Commerce Department underscored the persistence of the inflation that is eroding Americans' purchasing power, dimming their confidence in the economy and threatening Democrats in Congress in the run-up to the November midterm elections.
On a month-to-month basis, prices rose 1% from May to June, faster than the 0.6% rise from April to May and the biggest such jump since 2005.
The government’s report also said that consumer spending managed to just outpace inflation, rising 0.1% from May to June after adjusting for price changes. Consumer spending has weakened in the face of high inflation. But it’s helping fuel inflation itself, with demand still strong for services ranging from airline tickets and hotel rooms to restaurant meals and new and used autos.
Inflation has been rising so fast that despite the pay raises many workers have received, most consumers are falling behind the pace of cost-of-living expenses.
High inflation and interest rates are also hampering the U.S. economy, which shrank in the April-June quarter for a second straight quarter, intensifying fears that a recession is looming. Two quarters of declining growth meet an informal rule of thumb for when a recession begins, although robust hiring suggests that the economy still maintains pockets of strength and isn't yet in a downturn.
