The Consumer Price Index advanced 1.1 percent during the month, the biggest monthly rise since June 1982, the government said. That was well above the 0.7 percent increase economists polled ahead of the report were expecting, Reuters reported.
Much of the consumer price jump was blamed on energy prices, which shot upward by 6.6 percent, reflecting big gains for gasoline, home heating oil and natural gas.
Excluding food and energy prices, the core CPI rose by a more moderate 0.3 percent, but that rise was still higher than the 0.2 percent gain expected.
The jump in prices cut significantly into consumers’ earning levels with average weekly wages, after adjusting for inflation, dropping by 0.9 percent in June, the biggest monthly decline since 1984, according to the Associated Press.
In another hit on consumer spending power, food prices also showed a big increase in June, rising by 0.7 percent, more than double the 0.3 percent increase of May. Vegetable prices shot up by 6.1 percent, the biggest increase in nearly three years, the AP reported.
“The inflation numbers were higher than expected and put the full-year inflation rate up to 5 percent, which is the high end of what we’ve seen since the early 1990s,” Gary Thayer, A senior economist with Wachovia Securities told Reuters. “This increases concern that the Fed is not going to be able to lower interest rates if the economy remains weak.”
The consumer price index is a critical measure of the nation’s inflation rates and Wednesday’s report comes on the heels of Federal Reserve chief Ben Bernanke’s message to lawmakers that inflation remains a top concern of policymakers as the country struggles to handle high energy costs and a sluggish real estate market.
“Given the high degree of uncertainty” surrounding the nation’s economic outlook, Fed policymakers will need to carefully assess incoming information about inflation and economic growth, Bernanke told a Senate panel on Tuesday.