FX.co ★ U.S. Consumer Prices Unexpectedly Dip In June, Annual Growth Slows More Than Expected

### Consumer Prices in the U.S. Show Unexpected Decline in June

In a surprising development, consumer prices in the United States dipped slightly in June, according to a closely monitored report from the Labor Department released this Thursday.

The Labor Department indicated that the Consumer Price Index (CPI) fell by 0.1 percent in June, following a stagnant performance in May. This decline was contrary to economists' predictions, who had anticipated a modest increase of 0.1 percent.

The primary driver behind the unexpected decrease in consumer prices was a significant drop in gasoline prices, which plummeted by 3.8 percent in June, following a 3.6 percent decline in the previous month.

This sharp decline in gasoline prices helped counterbalance ongoing increases in shelter costs and a rise in food prices.

When excluding volatile food and energy prices, core consumer prices rose by 0.1 percent in June, slightly down from a 0.2 percent increase in May. Analysts had projected another 0.2 percent rise in core prices.

The increase in core prices was largely attributed to higher costs in shelter, motor vehicle insurance, household furnishings and operations, medical care, and personal care.

Conversely, the report highlighted price reductions in airline fares, used cars and trucks, and communication services.

On an annual basis, the rate of consumer price growth slowed to 3.0 percent in June, down from 3.3 percent in May. This was slightly below economists' expectations of a 3.1 percent growth pace.

Similarly, the annual rate of core consumer price growth moderated to 3.3 percent in June from 3.4 percent in the preceding month. The growth pace for core prices had been anticipated to remain stable.

Kathy Bostjancic, Nationwide Chief Economist, remarked, "Another favorable inflation report in June supports our forecast that the Federal Reserve can start reducing interest rates in September, potentially lowering the federal funds rate by 50 basis points by the year's end."

She added, "Importantly, the benign 0.1% increase in core CPI allowed the 3-month annualized rate to slow further to 2.1% from 3.3% in May, marking a significant drop from the 4.5% recorded in March."

Looking ahead, the Labor Department is set to publish a separate report on producer price inflation for June this Friday.

Expectations are that the Producer Price Index (PPI) will inch up by 0.1 percent in June, following a 0.2 percent decline in May. The annual rate of producer price growth is projected to rise slightly to 2.3 percent from 2.2 percent.

This update provides a clearer picture of the inflationary trends impacting the U.S. economy, with potential implications for future Federal Reserve policies.