US consumer prices drop in June as energy costs tumble

Consumer prices in the United States tumbled in June as energy prices fell, led by cheaper petrol, after concerns in global energy markets over the Strait of Hormuz temporarily eased.

Prices fell by 0.4 percent on a monthly basis, according to the Department of Labor’s Bureau of Labor Statistics Consumer Price Index (CPI) released on Tuesday.

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list 2 of 4How new Yemen tensions could complicate the global energy crisis
list 3 of 4‘Piracy’: Will Trump’s 20 percent Hormuz toll find takers?
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end of list

Energy prices led the declines, tumbling 5.7 percent, marking the biggest monthly decline since April 2020. Oil prices led the way, falling 9.7 percent, while petrol prices dropped 9.5 percent.

The average price for a gallon of petrol (3.78 litres) is $3.85, down from $4.07 at this time last month, according to the American Automobile Association (AAA), which tracks daily petrol prices.

“President [Donald] Trump consistently said that, as traffic in the Strait of Hormuz normalizes, oil prices – and thus overall inflation – would plummet like a rock,” White House Deputy Press Secretary Kush Desai said in a post on X.

Experts said that reprieve could be short-lived as a ceasefire between the US and Iran fell apart after commercial tankers were hit in fighting last week. Since then, prices have climbed from $3.79, according to AAA data.

“June CPI is a rearview mirror – the decline was real, but reflects prices from wks ago. new escalations have oil right back up, WTI [West Texas intermediate crude oil] over $80 today. nat avg $3.81 and climbing: $4 gas is days away, w/diesel headed back to $5,” Patrick De Haan, head of petroleum analysis at GasBuddy, said in a post on X.

Al Jazeera asked the White House about the increasing petrol prices in a follow-up to the post on X, but it did not respond.

Other sectors saw pullbacks as well. The cost of apparel fell by 0.6 percent on a monthly basis, the cost of a used car or truck fell by 0.2 percent, and the cost of electricity ticked down 1 percent.

Food prices grew by 0.2 percent on a monthly basis. Meat prices jumped 0.6 percent, and lettuce prices rose 6.5 percent. Fresh fruit and vegetable prices, however, fell by 0.5 percent. Tomato prices tumbled 10 percent.

The annual data tells a different story. Overall, the CPI rose 3.5 percent after a 4.2 percent increase in May, which was the largest annual increase in more than three years.

Energy prices jumped 15.7 percent compared with a year earlier with petrol prices rising 27 percent. Shelter costs increased 3 percent.

Grocery prices were up 3 percent compared with this time last year. Meat prices were up 7.4 percent, and fresh fruits and vegetables were up 5.3 percent.

The CPI report was released amid heightened pressure on the Federal Reserve under its new leader. Fed Chairman Kevin Warsh, who took the helm from Jerome Powell in May, said in prepared remarks to lawmakers that the central bank has “no tolerance for persistently elevated inflation”.

CME FedWatch, which tracks the likelihood of monetary policy decisions, forecasts an 87.7 percent probability that rates will remain at 3.5-3.75 percent with the remaining probability forecasting a 25-basis-point increase to 3.75-4 percent at the next policy meeting this month.

US markets were trending upwards on the heels of the consumer data. The Nasdaq was up 0.9 percent, followed by the S&P 500, which was 0.5 percent higher than at the market open. The Dow Jones Industrial Average was up 0.1 percent in midday trading.

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