WASHINGTON (AP) — U.S. inflation cooled last month as the cost of gas, clothes, and used cars fell, providing some relief to consumers, while underlying price pressures also slowed more than expected.
Consumer prices dropped 0.4% from May to June, the largest monthly drop in four years, the Labor Department said Tuesday, after rising 0.5% in the previous month. On a yearly basis, inflation declined to 3.5%, down from a year-over-year gain of 4.2% in May and lower than many economists expected.
Excluding the food and energy categories, core prices were unchanged from May to June, a positive sign that underlying inflation is declining. On a yearly basis, core prices rose just 2.6%, down from 2.9% the previous month. Core inflation remains above the Federal Reserve’s target of 2%.
The core figures suggest that the gas price spike from the Iran war, while it pushed up airfares and some other costs, hasn’t so far led to broad-based, sustained inflation, economists said.
“This reading is very much in the camp that the inflation we’ve had this year is transitory,” said Michael Metcalfe, head of macro strategy at State Street Markets. “Yes, gas prices went up, but nothing else did, more or less.”