Consumer prices shot up in June at the second fastest pace in 26 years with two-thirds of the surge blamed on soaring energy prices.
Federal Reserve Board Chairman Ben Bernanke reports on the economy as he appears before the Senate Banking Committee on Capitol Hill in Washington, Tuesday, July 15, 2008. [Agencies]
The Labor Department reported that consumer prices jumped 1.1 percent last month, much worse than had been expected. Energy prices rocketed upward by 6.6 percent, reflecting big gains for gasoline, home heating oil and natural gas. The big rise in prices cut deeply into consumers' earning power with average weekly wages, after adjusting for inflation, dropping by 0.9 percent in June, the biggest monthly decline since 1984.
The 1.1 percent June price increase was the second largest monthly advance in the past 26 years, surpassed only by a 1.3 percent gain in September 2005 from a jolt to energy costs after Hurricane Katrina.
Separately, the Federal Reserve reported that industrial output rose 0.5 percent in June, the fastest pace in 11 months. The increase, the highest since a 0.6 percent gain in July of last year, reflected an end to an automotive production strike rather than any widespread strength in the economy.
The report on retail inflation followed similarly grim news on Tuesday that wholesale prices had shot up by 1.8 percent in June.
The news on inflation kept a lid on stock prices, which were trading mixed after one of the nation's largest banks, Wells Fargo, announced it would raise its dividend.
Federal Reserve Chairman Ben Bernanke told Congress on Tuesday that the Fed was concerned about the threats posed by rising inflation.
