July 08, 2021
(The monthly Consumer Price Index (CPI) is scheduled for release by the Bureau of Labor Statistics on Tuesday, July 13th at 8:30 AM Eastern Time.)
Prices in June will still be correcting from the sharp plunges in many areas during the pandemic. This means we should expect another month of large price increases in hotels, airfares, and apparel, with prices in all three sectors well below their pre-pandemic level.
We have seen a rough return to the normal pattern of food and restaurant prices, with the latter outpacing the former by an average 0.7 percent over the last two years. We are likely to see a larger increase in restaurant prices relative to food prices in June, as some restaurants will take advantage of a temporary shortage of capacity in the sector.
A big question will be the extent to which car prices, both new and used, are leveling off. This has been, by far, the largest factor driving the uptick in inflation the last two months. (Dean Baker adds further context to inflation debates here.) June is likely to see a slowing, especially in the rate of price increases for used cars, but it may be another month or two before they start to fall back to more normal levels.
Rent, both rent proper and owners’ equivalent rent, has been a large factor restraining core inflation. The sharp run-up in house prices has not been reflected in rents thus far. A factor going the other way is that if we actually see a flood of evictions as moratoriums end, it will mean that there will be many vacant units putting downward pressure on rents.
Medical care costs have continued to remain under control. If that continues to be the case, it will be another factor limiting core inflation.
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