US inflation surges again in June, raising risks for economy

WASHINGTON (AP) — U.S. inflation surged to a new four-decade high in June because of rising prices for gas, food and rent, squeezing household budgets and pressuring the Federal Reserve to raise interest rates aggressively -- trends that raise the risk of a recession.

The government’s consumer price index soared 9.1% over the past year, the biggest yearly increase since 1981, with nearly half of the increase due to higher energy costs.

Lower-income and Black and Hispanic American have been hit especially hard, since a disproportionate share of their income goes toward essentials such as transportation, housing and food. But with the cost of many goods and services rising faster than average incomes, a vast majority of Americans are feeling the pinch in their daily routines. For 72-year-old Marcia Freeman, who is retired and lives off of a pension, there is no escape from rising expenses.

“Everything goes up, including cheaper items like store brands,” said Freeman, who visited a food bank near Atlanta this week to try and gain control of her grocery costs.

As consumers’ confidence in the economy declines, so have President Joe Biden’s approval ratings, posing a major political threat to Democrats in the November congressional elections. Forty percent of adults said in a June AP-NORC poll that they thought tackling inflation should be a top government priority this year, up from just 14% who said so in December.

U.S. inflation erupted amid a swift rebound from the 2020 pandemic recession. Consumers unleashed a wave of pent-up spending, spurred by vast federal aid, ultra-low borrowing costs and savings they had built up while hunkering down. As Americans channeled their purchases toward items for the home, like furniture, appliances and exercise equipment, supply chains became snarled and prices for goods soared. Russia’s war against Ukraine further magnified energy and food prices.

In recent months, as Covid fears have receded, consumer spending has gradually shifted away from goods and toward services, resulting in higher prices for vacations, restaurant meals and entertainment.

The year-over-year leap in consumer prices last month followed an 8.6% annual jump in May. From May to June, prices rose 1.3% — the largest monthly increase since 2005 —after prices had surged 1% from April to May.