Inflation

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The cost of wholesale goods and services jumped 1.1% in June largely due to higher gas prices, but there was little evidence that intense U.S. inflation pressures more broadly were going to relent much in the near future.

Economists polled by The Wall Street Journal had forecast a 0.8% gain.

The increase in wholesale prices over the past 12 months, meanwhile, rose to 11.3% from 10.9%, the government said Thursday. Just a year and a half ago, prices were rising at a less than 2% pace.

A day earlier, the government also reported that the prices consumers pay directly had risen 9.1% in the past 12 months — the biggest increase in almost 41 years.

If food, gas and retail trade margins are omitted, so-called core producer prices rose just 0.3% in June in a glimmer of hope that inflation is starting to ease. That’s the smallest increase in four months.

But economists says steady progress has to be shown before it can be called a trend.

Wholesale and consumer prices are likely to ease in July if the recent decline in oil sticks, but make no mistake: High inflation is here to stay for a while.

The wholesale cost of goods leaped 2.4% last month, with 90% of the increase tied to energy. Higher gasoline prices played a big role in inflation in both wholesale and consumer goods and services in June.

Fortunately consumers are getting some relief at the pump after a decline in oil prices in July. Gasoline prices have fallen more than 40 cents a gallon this month after they topping $5 in June for the first time ever.

n another good sign, wholesale food prices rose a scant 0.1% in June. It’s the smallest advance in six months.

The core rate of wholesale inflation, meanwhile, slowed to 6.4% from 6.7% in June and a pandemic peak of 7.1% in the early spring.

“Despite a modest improvement in supply conditions, price pressures will remain uncomfortable in the near term and bolster the Fed’s resolve to prevent inflation from becoming entrenched in the economy,” said U.S. economist Mahir Rasheed of Oxford Economics.

Long lines are back at food banks around the U.S. as working Americans overwhelmed by inflation turn to handouts to help feed their families.

With gas prices soaring along with grocery costs, many people are seeking charitable food for the first time, and more are arriving on foot.

Inflation in the U.S. is at a 40-year high and gas prices have been surging since April 2020, with the average cost nationwide briefly hitting $5 a gallon in June. Rapidly rising rents and an end to federal COVID-19 relief have also taken a financial toll.

The food banks, which had started to see some relief as people returned to work after pandemic shutdowns, are struggling to meet the latest need even as federal programs provide less food to distribute, grocery store donations wane and cash gifts don’t go nearly as far.

The surge in food prices comes after state governments ended COVID-19 disaster declarations that temporarily allowed increased benefits under SNAP, the federal food stamp program covering some 40 million Americans .

“It does not look like it’s going to get better overnight,” said Katie Fitzgerald, president and chief operating officer for the national food bank network Feeding America. “Demand is really making the supply challenges complex.”

Charitable food distribution has remained far above amounts given away before the coronavirus pandemic, even though demand tapered off somewhat late last year.

Feeding America officials say second quarter data won’t be ready until August, but they are hearing anecdotally from food banks nationwide that demand is soaring.

At the Houston Food Bank, the largest food bank in the U.S. where food distribution levels earlier in the pandemic briefly peaked at a staggering 1 million pounds a day, an average of 610,000 pounds is now being given out daily.

That’s up from about 500,000 pounds a day before the pandemic, said spokeswoman Paula Murphy said.

Murphy said cash donations have not eased, but inflation ensures they don’t go as far.

Black households in the U.S. faced higher and more volatile inflation compared to white households from 2004 to 2020, reveals new research from the University of California San Diego’s School of Global Policy and Strategy. The study, published today by the Federal Reserve Bank of Richmond, finds that Black families experienced slightly higher inflation and 13 percent more volatile inflation, which impacts prices on groceries and other household essentials.

Study author Munseob Lee, assistant professor of economics at the School of Global Policy and Strategy, says Black families spend a larger portion of their income on essential goods and services, like electricity and wireless phone services, compared to white households that spend more on luxury items, such as wine and pet care, which are less likely to fluctuate in price.

Lee’s research is the first to provide race-specific data on the impacts of inflation and suggests that income inequality in the U.S. is rising faster than current estimates.

“Black and low-income households are more likely to live in food deserts and have limited access to affordable and nutritious food,” Lee said. “As we saw recently, in those areas, retail products became more expensive and shelves in the retail stores became frequently empty because of increased shipping costs and supply chain disruption. This volatility makes it more difficult for households to predict and recalibrate consumption and savings.”

Lee’s study reveals that Black households tend to have fewer options when inflation increases. He found white households would shop at less expensive supermarkets and convenience stores; however, many Black households were already shopping at these markets.

He added that with gas prices rising, it becomes more difficult for these families to use transportation to find essential goods, so if a product is out of stock, it often means low-income shoppers can’t buy it at all.

The study utilized consumer data from Nielsen on spending in retail outlets. Survey responses from 60,000 U.S. households from 2004 to 2020 continually provided information about what products consumers buy and when and where they make purchases. Race is self-reported by households by one of four options: white, Black, Asian and other. Most households (82.2 percent) identified as white and 10 percent identified as Black.

Lee also leveraged previous research from his paper “Cost of Living Inequality During the Great Recession,” which showed that during the recession, high-income households used more coupons, but this was not the case for low-income shoppers.

“‘Coupon-cutting’ often requires time and Black or low-income households tend to have less leisure time because they have higher working hours and are less likely to afford childcare or assistance with household chores,” Lee said.

There are important policy implications to Lee’s findings. Firstly, government agencies should consider measuring inflation by race and income. There are no official statistics in the U.S. on inflation rates by any demographic, meaning that estimates of poverty and inequality under the assumption everyone experiences inflation in similar ways can be misleading.