U.S. consumer prices in June accelerated at the fastest annual pace since November 1981.
The Bureau of Labor Statistics' Consumer Price Index (CPI) reflected a year-over-year increase of 9.1% last month, up from the prior 40-year high of 8.6% in May. Economists were expecting June's reading to show an 8.8% increase, according to estimates compiled by Bloomberg.
On a monthly basis, the broadest measure of inflation rose at a pace of 1.3%, inching up from 1% in May and climbing at a faster tempo than the 1.1% climb economists had projected. This marked the largest monthly increase since 2005.
U.S. stocks were slammed early Wednesday following the hotter-than-expected print. The S&P 500 dropped 1.3% at the open, while the Nasdaq shed 1.7%, and the Dow fell 1.1%.
The continued surge in inflation across the U.S. economy was elevated by broad-based increases, including high food costs and record gasoline prices, which topped more than $5 per gallon at the pump last month.
“Core” CPI, which excludes the more volatile food and energy components, rose 5.9% in June, compared to 6.0% in May. Economists expected a 5.7% increase in this measure.
The report's energy index soared 7.5% in June and 41.6% over the last year, marking the largest 12-month increase since the period ending April 1980. Meanwhile, the component of the report tracking food prices increased 1% over the month and 10.4% annually, the biggest 12-month increase since the period ending February 1981.
Commodity prices have been under pressure in recent weeks, however, with crude oil falling more than 8% on Tuesday.
"Overall, this report confirms that the Fed will need to hike by 75bp again at the end-July meeting," Capital Economics Senior U.S. Economist Michael Pearce said. "While some will draw parallels with the shockingly bad May CPI report, the backdrop is markedly different - commodity prices have fallen sharply and we’ve seen clearer signs of an economic slowdown, both of which will contribute to weaker price pressures ahead."
In Washington, the White House on Tuesday warned in a call with reporters that June’s inflation numbers were likely to be “highly elevated” but downplayed the weight of last month’s figure, pointing to gas prices that have since retreated from their highs.
"The Administration tried to get out in front of the bad economic news, and tell us the inflation report was going to be ugly this month, but it was even worse than markets imagined in their wildest dreams," FWDBONDS Chief Economist Christopher Rupkey said in emailed commentary.