For the first time in six years, US consumer prices actually went down. The Consumer Price Index dropped 0.4% in June, a sharp reversal from May’s 0.5% increase, according to data released by the Bureau of Labor Statistics on July 14.
The culprit, or hero depending on your portfolio, was energy. Gasoline prices plunged 9.7% in a single month, dragging the broader energy index down 5.7%. Year-over-year headline inflation cooled to 3.5%, a meaningful step down from May’s 4.2%.
What the numbers actually say
The monthly CPI decline is the first since April 2020, when the economy was in freefall from pandemic lockdowns. The context this time is entirely different. Rather than demand collapsing, June’s drop was driven almost entirely by a correction in energy prices that had spiked earlier in the year due to geopolitical tensions in the Middle East.
Core CPI, which strips out food and energy, was essentially flat month-over-month. It rose 2.6% on a year-over-year basis, down from 2.9% in May. That’s progress, but it’s still above the Fed’s 2% target.
