Consumer prices fell 0.4% in June, the biggest monthly decline since the early months of the pandemic, as gasoline prices posted their steepest drop in more than six years.
Annual inflation slowed to 3.5% from 4.2% in May, while core inflation, which excludes food and energy, was unchanged for the month and eased to 2.6% year over year.
Consumers received relief at the pump, but food and housing costs continued to edge higher, showing that inflation pressures remain uneven across the economy.
It may not feel like it, but consumer prices declined sharply in June. Sharply lower gasoline prices more than offset continued increases in food and shelter costs, providing the biggest one-month drop in inflation since the early months of the COVID-19 pandemic.
The Consumer Price Index (CPI) fell 0.4% on a seasonally adjusted basis in June after rising 0.5% in May, according to the Bureau of Labor Statistics. It was the largest monthly decline since April 2020, when widespread economic shutdowns pushed prices lower. Over the last 12 months, the CPI increased 3.5%, down from the 4.2% annual inflation rate recorded in May.
The primary reason for the decline was energy. The energy index fell 5.7% during the month, with gasoline prices plunging 9.7%. The drop in energy costs more than offset increases in food and shelter, making energy the largest contributor to the overall decline in consumer prices.
Core inflation, which excludes the volatile food and energy categories and is closely watched by the Federal Reserve, was unchanged in June after increasing 0.2% in May. On an annual basis, core inflation slowed to 2.6% from 2.9% the previous month, suggesting underlying price pressures continued to moderate.
Food prices still rising
Food prices continued to rise, though at a modest pace. The overall food index increased 0.2% in June, matching May's gain. Grocery prices also rose 0.2%, led by a 4.3% jump in egg prices and a 1.2% increase in dairy products. Meat, poultry, fish, and eggs rose 0.6%, while cereals and bakery products increased 0.3%.
Some grocery categories became less expensive. Nonalcoholic beverages fell 1.5% as coffee prices dropped 2.0%, and fruit and vegetable prices declined 0.2% during the month. Restaurant prices continued to climb, with the food-away-from-home index rising 0.2%.
Shelter costs, one of the biggest contributors to inflation over the past several years, rose just 0.1% in June — the smallest monthly increase since January 2021. Owners' equivalent rent increased 0.2%, while rent rose 0.1%. Lodging away from home fell 2.3%.
Declines in other sectors
Several other categories also posted price declines. Motor vehicle insurance dropped 2.0% after falling 1.7% in May. Communication services fell 1.5%, apparel declined 0.6%, and used car and truck prices slipped 0.2%. Medical care prices edged down 0.1%, reflecting declines in physician services and prescription drug costs.
Despite June's decline, prices remain higher than a year ago. Energy costs are still up 15.7% over the past 12 months, including a 26.7% increase in gasoline prices. Food prices have risen 3.0% over the past year, while shelter costs are up 3.3%.