Commodity Online
WASHINGTON : Inflation rate in the United States, world’s largest economy, hit its highest rate in almost three decades in June as US consumers spent tens of billions of dollars of tax rebates and the price of petrol continued to surge
Inflation jumped by 0.8 per cent in the month of June, the most since February 1981, when prices rose by 1.0 per cent, according to the Commerce Department.
Although Monday’s figures indicate that inflation is an greater concern than previously thought, the US Treasury is expected to hold its benchmark interest rate steady at 2 per cent Tuesday because of concerns about the strength of the economy.
Analysts predicted that the economy would slow in the second half of the year as the impact of the rebate cheques subsided.
The prospect of rising inflation and a slowing economy combined with a warning by HSBC that bad loans had increased in America to hit US shares. The Dow Jones industrial average declined by 89.6 points, or 0.6 per cent, to 11,236.8.
Financial shares led the declines, especially those with a large exposure to America’s housing market.
Specifically, the price index for personal consumption expenditures increased 0.8 per cent, marking the largest month-to-month gain since September 2005, when a 1.0 per cent rise was reported.
Also, June's PCE price index increase was the second-largest on-month gain since February 1981, the Commerce Department said. The PCE price index had climbed 0.5 per cent in May.
The stimulus payments were reflected in the income data as personal current transfer receipts, which fell $21.4 billion in June, compared with an increase of $187.5 billion during May.
The income report showed private wage and salary disbursements increased $11.1 billion in June, compared with an increase of $17.7 billion in May.
June disposable personal income - income after taxes - fell by 1.9 per cent, after rising 5.7 per cent in May. The 1.9 per cent dip was the largest decrease since August 2005.
The Commerce Department reported personal saving as a percentage of disposable personal income was 2.5 per cent in June.
