Consumer prices rose 1.1% in June, the biggest monthly inflation swing in 26 years. Not unlike yesterday’s PPI report , today’s release of the latest consumer price index was a doozy… the annual rate of inflation has now risen to 5%, the worst yearly rate in 17 years.
All measures of inflation blew past consensus expectations in June, even the precious “core rate,” which rose only 0.3%. Energy was the driver of higher consumer prices yet again… prices rose 6.6% in June and are up 24% this year. Gas costs rose 10% in the month, up 32% over the last 12 months. Food and beverages are up 5.2% year over year, another eyesore of an altogether nasty report.
There is one bright spot: personal computers. If you’re in the market for a new PC, you can rest easy… prices fell 1.4% last month, and nearly 12% from a year prior. Feel better yet?

Until 1983, the inflation rate kept respectable pace with M3, the fullest measure of U.S. money supply. But then, alas, came the BLS adjustments. Independent analysts tell us that M3 is now increasing 12% per year, but the inflation rate magically stays at 2-3%.
These changes to the CPI equation have ushered in an a golden era of ‘silent inflation.’
“Most Americans have been numb to this trend, for several reasons. They've paid more to keep up, at the expense of saving less. They fueled their consumption by borrowing off the very roofs that cover their heads. They've been convinced the golden train of American prosperity hasn't passed them by. They believe this myth despite the strikingly negligible increase in real median weekly earnings over the past 25 years.
“The changes to the CPI calculations certainly served Washington's best interests. They use the inflation rate to index the annual payment increases in everything from your weekly paycheck to government programs such as Medicare and Social Security -- the very same programs millions of Americans depend upon every day.”
Ben Bernanke affirmed before Congress this past week about inflation “seems likely to move temporarily higher,” and “an unwelcome rise in actual inflation over the longer term,” is possible.
Bernanke testified this week in a semiannual get-together with Congress. The Fed chief issued a sober forecast, suggesting that housing prices might take a year or more to turn around and that high energy prices were likely to persist.
I still say the governments statistics are a conflict of interest. The BLS has to keep adjusting the formula to keep up with the times. As they do that they are trying to keep the price adjustments down to keep the fed from paying oout more for the increase in Social Security. Think about it. You feel it in your pocket book more than the government says it really is. Therefore inflation will continue to roll on.