Consumer prices rise sharply again in July

The extent of jump in gains has come as a surprise to economists.

For the White House, figures have become a political headache as Republicans use them to claim economic mismanagement.

NEW YORK — Consumer prices rose at a rapid clip again in July, gains that could be problematic for both Federal Reserve officials and the Biden White House.

Prices increased by 5.4% last month compared with a year earlier, the Labor Department’s Consumer Price Index showed Wednesday. The inflation measure rose 0.5% from June.

The annual gain was slightly more than the 5.3% jump expected by economists, according to the median prediction of those surveyed by Bloomberg. The monthly gain matched the anticipated 0.5% increase.

The monthly figure did represent a moderation in the pace of increase — the CPI rose 0.9% in June from May — but inflation is still faster than is typical.

Economists widely expected that price gains would pick up this year after slumping in 2020, but the extent of the jump has come as a surprise. Yearly price gains will almost surely moderate in the months ahead, as a data quirk that has been helping exaggerate them fades. Monthly gains are also expected to continue cooling off as businesses find ways to cope with short-term disruptions to supply chains, which have pushed car prices sharply higher and led to part of the 2021 pop.

But the key question for the Fed, and the White House, is just how quickly that will happen.

For the Fed, which is charged with keeping price gains low and steady over time, temporary price jumps are tolerable — but persistent gains would be a problem. For the White House, climbing costs have become a political headache as Republicans use them to claim that the Biden administration is mismanaging the economy.

Here are a few things to know about Wednesday’s data.

The pop is tied to pandemic reopening. The increase in inflation this year has come heavily from a few categories of goods and services in which supply has struggled to catch up with booming consumer demand.

Car production has been limited by a computer chip shortage, and rapid demand has sent the prices for used cars soaring this year. That moderated in July — the used car index climbed only slightly, at 0.2% from June (after rising 10.5% in June from May) — but costs of new vehicles continued to advance rapidly, climbing 1.7% from the prior month.

Shelter costs also increased, buoyed by a sharp increase in hotel rates. “Lodging away from home” costs were up 6% from the prior month, following a 7% gain between May and June.