Inflation will likely remain a headache even if the rate of price increases slowed in June.Subscribe to read this story ad-freeGet unlimited access to ad-free articles and exclusive content.The Bureau of Labor Statistics is set to report the consumer price index for last month at 8:30 a.m.
ET on Tuesday.Many economists expect to see a decline in the overall headline number thanks to falling energy prices.
But some warn that the issue is nowhere close to over, and price declines may take more time to happen than consumers would like — especially if energy prices surge again.After the United States and Iran signed a memorandum of understanding in mid-June, oil prices declined from the mid-$90s to around $70 per barrel.
However, that decline has started to come undone, at least partially.Both U.S.
crude and Brent oil benchmarks are trading much higher than their recent low, with Brent touching $80 per barrel on Monday.“With the MOU on life support and tensions escalating in the Middle East,” inflation expectations are facing “renewed pressure,” Société Générale strategists said in a note.
Compounding the issue, critical oil storage hubs have been drawn down in a bid to keep a lid on prices, but those storage facilities have reached decades-low levels.They will need to be refilled with hundreds of millions of barrels of oil, which could again cause prices to rise.Gas prices, the most visible sign of inflation to consumers, are tracing a similar trajectory.
In recent weeks, prices declined sharply from the highest level of the year.However, in the last week, that decline came to a halt at $3.79 per gallon, and prices have risen 8 cents since, as of Monday.Those rising gas prices come at the same time as slowing wage growth.
In June, average hourly earnings increased by 3.5%, far below May’s inflation reading of 4.2%.Economists expect the rate of inflation to fall by 0.2% on a month-over-month basis or to 3.8% from a year ago, according to a surve...