Rising Prices: Which Goods and Services Are Driving Inflation?

The June Consumer Price Index (CPI) showed that inflation moderated substantially last month, but rising costs for key goods and services continue to pressure peoples' wallets.

Prices fell in June for the first time in almost two years. Headline CPI declined 0.1% month-over-month, for the first drop in 23 months, according to the U.S. Bureau of Labor Statistics. Economists forecast inflation to increase by 0.1% vs May. On an annual basis, CPI rose 3.0% in June – down from 3.4% the prior month – to beat estimates for a 3.1% gain. 

Core CPI, which excludes food and energy costs, likewise surprised to the downside, rising just 0.1% in June vs the previous month. Forecasts called for a 0.2% increase.

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"This morning’s inflation report was much better than expected, showing a decline in headline inflation driven by lower energy costs," says Mike Cornacchioli, senior vice president for investment strategy at Citizens Private Wealth. "Core inflation also posted its smallest monthly gain since August 2021, helped by a slowdown in shelter growth and lower auto prices."

The bottom line from the June CPI report is that prices are still rising at a rate not seen in generations. 

Between 2000 and 2020, annual inflation in the U.S. averaged just 2.1%. (Recall that the Federal Reserve's inflation target is 2%.) Perhaps we didn't appreciate it enough at the time, but the first two decades of the 21st century were a sort of Goldilocks era for inflation: not too fast and not too slow. 

Just have a look at some of the subcategories in the latest CPI report to see how much things have changed. Below we highlight the goods and services that are weighing most heavily on folks' finances.

Rising prices: where inflation is hitting hardest

On a monthly basis, most categories tracked by the BLS showed price declines. However, a few select categories still stuck out. 

The index for food prices increased 0.2% last month after rising 0.1% in May. On an annual basis, food away at home is up 2.2%, led by a 4.1% increase in food away from home and a 1.1% rise in food at home. 

Apparel was another area where consumer continued to feel some sticker shock. Prices rose 0.1% last month after declining by 0.3% in May. Over the past year, apparel prices have gone up 0.8%, per the BLS.

Elsewhere, the medical services index expanded by 0.2% in June after rising 0.3% the previous month. Housing as measured by the shelter index rose 0.2% last month, slower than the 0.4% rise in May. However, on annual basis, shelter costs were up 5.2%

"Shelter, which comprises the largest portion of CPI, decelerated meaningfully from 0.4% in May and was responsible for the downside beat," says José Torres, senior economist at Interactive Brokers.

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