Topline
Inflation is at its highest level since November 1981, according to data released by the Labor Department Wednesday, with consumer prices rising 9.1% from June 2021 to June 2022 and 1.1% from May to June, but rapidly declining gas prices may provide a reason for inflation optimism moving forward.
A customer pumps gasoline into his car at a gas station in California.
Key Facts
Gas prices were one of the largest drivers of inflation last month, rising 9.9% from May to June, the most of any good tracked by the consumer price index aside from food at employee sites and schools, which rose 24.2% in the period.
However, the month lag in data means the recent decline in gas prices is not baked into the most recent consumer price index.
The average price for a gallon of gas is $4.631 per gallon, according to AAA, down 38.5 cents, or 7.7%, from the highest-ever recorded price of $5.016 per gallon June 14.
The national average for a price of gas may fall to as low as $4 to $4.25 by next month if oil prices remain depressed, says Patrick De Haan, GasBuddy’s head of petroleum analysis.
A decline in other commodity prices such as wheat and corn may also further contribute to lower consumer prices, while a glut in retail inventory leading to markdowns nationally should also help.
Surprising Fact
The Labor Department’s index of airline fares fell 1.8% in June, and is one of the few indexes to decline in price in the last month. That comes after airline fares were one of the biggest risers in price in May, soaring 37.8% according to the Labor Department.
Tangent
The dip in gas prices over the last month is the sixth-largest 30-day drop ever, according to De Haan.
Key Background
The recent drop in gas prices is largely due to a dramatic decrease in crude oil prices on the back of loudening recession fears—U.S. benchmark West Texas Intermediate traded at $94.70 per barrel Wednesday, down 21.7% from a month prior, while international benchmark Brent crude traded at $98.41 per barrel Wednesday, down 19.6% from a month prior.
Further Reading
Inflation Spiked 9.1% In June—Hitting New 40-Year High As Price Surge Fuels Recession Fears (Forbes)
Why A Strong Dollar And Retail Inventory Blunders Could Help Push Inflation Down By Next Year (Forbes)
Source: https://www.forbes.com/sites/dereksaul/2022/07/13/inflation-rises-again-to-40-year-high-but-gas-prices-may-help-drive-that-down-soon/