The Labor Department reported that consumer prices fell 0.1 percent in June, down for the third straight month, paced by further declines in energy prices.
On a year-over-year basis, the government’s measure of annual inflation fell from 2.0 percent in May to just 1.1 percent in June, the lowest level since last October when the price index first pushed back into positive territory after almost a year of negative numbers.
Much of the reason that the inflation rate reached as high as 2.8 percent six months ago had to due with sharply higher energy prices when compared to the year-ago period, that is, during the depths of the recession when a barrel of oil sold for as little as $35.
Now, those big annual increases have all but disappeared as indicated in the modest 3.0 percent gain in the energy index below leaving domestic services such as medical care and education as more important influences on the overall index.
If energy prices fall from their current lofty levels (i.e., given the dimming outlook for economic growth), look for a speedy return back into negative territory.
Surprisingly, within the Transportation category, the price of automobiles plays an equally important role as the price at the pump for overall 4.9 percent increase from a year ago. According to the Labor Department data, the cost of used cars has risen 16.1 percent over the last 12 months. Moreover, the cost of public transportation has risen 10.9 percent since last year at this time, two items that you don’t hear much about in the news.
