Inflation at second-highest rate in 26 years

Nationwide consumer prices jumped in June, driven by high gasoline, transportation and food prices, the U.S. Bureau of Labor Statistics reported Wednesday. In the Chicago-Gary-Kenosha area however, inflation rose more modestly.

The Consumer Price Index, a key measure of inflation, shot up 1.1 percent on a seasonally adjusted basis from May to June. This was the second-largest national monthly increase in percentage terms in 26 years. The reading was substantially higher than Bloomberg LP's economists' estimate of 0.7 percent.

For the Chicago area, the index climbed 0.4 percent higher on an unadjusted basis, according to the BLS.

"There was a sense that prices were going up. So the real question was 'how much?' And 'how widespread is this inflationary pressure?' I think it's not good news on both accounts," said Adolfo Laurenti, an economist with Chicago-based Mesirow Financial Holdings Inc.

Over the past 12 months, inflation has increased at a rate of 5 percent, the fastest full-year pace since 1991 when the economy was emerging from a recession.

Noting the substantially higher rate of national inflation over the past three months, Laurenti said, "the sense is that inflation is accelerating." The annualized rate of inflation over that period is 7.9 percent.

Throughout the country, energy costs, influenced by gasoline prices, spiked 6.6 percent. This was a dramatic increase even from May when the energy index jumped by 4.4 percent.

Transportation expenses shot up 3.8 percent for the month, and food prices grew by 0.8 percent.

Laurenti said he was concerned about how the rising cost of gasoline "creates the condition for spillovers from energy to all the other goods that are relying on transportation to be shipped around."

Core inflation, which excludes volatile food and energy costs, increased 0.3 percent. Year over year core inflation is now at 2.4 percent which is above the range the Federal Reserve is comfortable with, Laurenti noted.

In Chicago the bad news was milder.

Paul LaPorte, an economist with the BLS, said that in the Chicago region fast-rising energy and electricity bills were offset by lower growth in food, beverage and apparel prices.