Here’s the June 2024 inflation breakdown — in one chart

Inflation eased further in June as lower gasoline prices combined with other easing price pressures to ease consumer wallets.

The consumer price indexA key measure of inflation rose 3 percent in June from a year earlier, up from 3.3 percent in May, the U.S. Labor Department said on Thursday.

The CPI measures how quickly prices are changing throughout the US economy. It measures everything from fruit and vegetables to haircuts, concert tickets and household appliances.

Perhaps the “most encouraging” news for consumers is that inflation for household staples eased dramatically, said Mark Zandi, chief economist at Moody’s Analytics.

“Prices for the basics — food at home, gas, new lease rent — haven’t changed in about a year,” Zandi said. “So people are paying the same for these essentials today as they were a year ago.”

April’s measure of inflation is down significantly from 2022’s pandemic-era high of 9.1%, which was the highest level since 1981.

However, it remains above policymakers’ long-term target of around 2%.

“We continue to expect inflation to moderate in the coming months as input cost pressures ease and softer consumer demand makes it more difficult [for businesses] to raise prices,” Sarah House and Aubrey George, economists at Wells Fargo Economics, wrote in a note this week.

However, additional improvements are likely to be “slow,” they wrote.

The Federal Reserve uses inflation data to help guide its interest rate policy. He raised interest rates to their highest level in 23 years amid the pandemic, raising the cost of borrowing for consumers and businesses in an effort to tame inflation.

Last month, Fed officials predicted they would begin cutting interest rates by the end of 2024.

“All indications are that inflation has moderated, is back close to the Fed’s target and is consistent with a rate cut in September,” Zandi said.

There was also a broad decline in grocery prices.

“Food at home” prices have risen by just 1.1% since June 2023, according to CPI data.

Consumers have more “breathing room” in-store amid “increasing promotional activity” among retailers, while some “major” companies have recently announced price cuts “that are likely to put pressure on competitors’ prices,” economists House and George wrote.

While annual figures on inflation trends are useful, economists generally recommend looking at monthly numbers as a better guide to short-term movements and prevailing trends.

They also generally like to look at indications of “core” inflation. They strip food and energy prices, which can be volatile from month to month.

The monthly core CPI reading was 0.1% in June, the smallest increase in about three years, since August 2021. It has fallen for three straight months, from 0.4% in March. (To get back on target, economists say the monthly reading should be steady in the range of around 0.2%).

The “core” CPI has risen 3.3% since June 2023, the smallest 12-month gain since April 2021.

Housing is the largest component of the core CPI and therefore has an outsized impact on inflation measurements. It accounted for nearly 70% of the overall 12-month increase in core CPI.

Shelter inflation has moderated much more slowly than expected, one of the big reasons why inflation has not yet fallen to target, economists said.

The shelter index lags behind broader trends in the rental market because of the way the government constructs it.

But economists expect the shelter to shrink further as inflation for market rents has plummeted. For example, the annual rate of inflation for new leases fell to 0.4% in the first quarter of 2024 – lower than its initial pre-pandemic rate – from record highs of around 12% just two years ago, according to the Bureau of Labor Statistics data.

There were encouraging signs in the latest CPI report: Monthly housing inflation eased to 0.2% after standing at 0.4% for four consecutive months. It was the smallest monthly gain since August 2021.

“It should continue to cool,” said Joe Seydl, senior market economist at JP Morgan Private Bank.

“It just takes time,” he added.

Inflation for physical goods jumped as the US economy reopened in 2021. The Covid-19 pandemic disrupted supply chains, while Americans spent more on their homes and less on services such as dining and entertainment.

It’s a different story now. Goods inflation has largely normalized, while services are a fly in the ointment.

“The goods side looks very favorable right now,” said Olivia Cross, North America economist at Capital Economics. “Where there is work to be done is in some areas of essential services and shelter.”

For example, prices for services such as auto insurance and medical care rose 19.5 percent and 3.3 percent, respectively, from June 2023, the BLS reported.

A spike in new and used car prices a few years ago is likely now fueling high inflation for car insurance and repair, as it generally costs more to insure and repair more expensive cars, economists said.

It also takes a long time — a year, two or even three — to translate higher health care labor costs into CPI metrics because of a lengthy contracting process, Zandi said. Pandemic-era higher health care wages are pushing up the medical care CPI now and likely will do so next year, he said.

The service sector is generally more sensitive to inflationary pressures in the labor market, such as strong wage growth.

Record demand for workers as the pandemic-era economy reopens has pushed wage growth to the highest level in decades. The labor market has since cooled and wage growth has slowed, although it remains above pre-pandemic levels.

“Inflationary pressure from the labor market has eased quite a bit,” Cross said.