An inflation gauge closely tracked by the Fed jumped 6.8% in June from a year ago, the government said Friday, the biggest such jump in four decades. Much of the increase was driven by energy and food.
Businesses have already noticed changes in consumer behavior as inflation erodes workers’ discretionary incomes.
The decline that the Commerce Department reported Thursday in the gross domestic product—the broadest gauge of the economy—followed a 1.6% annual drop from January through March.
The Fed is tightening credit even while the economy has begun to slow, thereby heightening the risk that its rate hikes will cause a recession later this year or next.
Unilever, which owns 400 consumer brands ranging from Ben & Jerry’s ice cream to Dove skin care, raised prices by more than 11% between April and June as inflation surged around the world.
The Conference Board said Tuesday that its consumer confidence index fell largely due to consumer anxiety over the current economic conditions, particularly four-decade high inflation.
Treasury Secretary Janet Yellen spoke just before a slew of economic reports will be released this week that will shed light on an economy currently besieged by rampant inflation and threatened by higher interest rates.
The government also reported earlier in July that U.S. employers advertised fewer jobs in May amid signs that the economy is weakening, though the overall demand for workers remained strong.
While people taking on multiple jobs is typically a sign of a healthy job market where workers have more job opportunities available, it is also a sign of increasing financial strain on Americans’ pocketbooks.
Nine of the 13 retail categories showed increases last month, according to the report, including furniture stores, e-commerce and sporting-goods stores.
Companies hit the brakes on deal-making during the first half of 2022 as concerns over pervasive inflation, interest rate hikes and the threat of a recession loomed over Wall Street.
Last month’s jump in wholesale inflation was led by energy prices, which soared 54% from a year earlier.
The latest inflation reading was supposed to offer hope that the U.S. economy had weathered the worst of the storm. But there was nothing reassuring in Wednesday’s report.
Rising costs have seeped into nearly every corner of the economy, with grocery prices jumping 12.2% compared with a year ago. Rents have risen 5.8% and new car prices have increased 11.4%.
While many countries define an economic downturn as two consecutive quarters of negative growth for gross domestic product, the U.S. defers this assessment to elite academics at the National Bureau of Economic Research.
The consumer price index probably increased 8.8% in June from a year earlier, marking the largest jump since 1981, according to the median forecast in a Bloomberg survey.
The surprisingly strong gain will likely spur the Federal Reserve to keep raising interest rates to cool the economy and slow price increases.
The changing mindset comes as companies confront a pullback in consumer spending, the prospect of an economic downturn and surging labor costs.
U.S. employers advertised fewer jobs in May as the economy has shown signs of weakening, though the overall demand for workers remained strong.
The S&P 500, Wall Street’s broad benchmark for many stock funds, closed the first half of 2022 with a loss of more than 20% after starting the year at an all-time high. It’s the worst start to a year since 1970, when Apple and Microsoft had yet to be founded.
