COLORADO SPRINGS — Inflation has risen even more than experts expected in the month of June while wages have actually fallen, and economic expert Tatiana Bailey said this doesn’t bode well for the recession outlook.

Inflation increased 9.1% comparing June of 2021 to June of 2022. This is even higher than the expected amount which was about 8.8%. That rise is also higher than the previous month year-over-year increase of 8.6%. Bailey said there are two glaring red flags in this cycle of inflation.

The first is that prices have been increasing the most for items that people have to buy. There are no real substitutes for shelter, food, or gasoline.

Looking at just how much these prices have risen over the past year, energy is the big story with year-over-year increases of 41.6%. Gasoline has come down since the peak season in June, and the Federal Reserve is hoping that the more recent declines in energy prices will cool the Consumer Price Index (CPI) in July.

Shelter is another major component to the CPI and the biggest component of household budgets. Those costs have increased 5.6% year-over-year. That doesn’t look so bad, said Bailey, but this measure will be elevated for many months to come, and she believes that it will go even higher because this measure lags behind actual shelter costs. Rents and home prices have increased up to 20% in some markets.

Food is another major household staple and that cost has increased 10.4%. Bailey explains that there is another measure, called the core CPI, which subtracts out the more volatile components of food and energy.

This core CPI increased 5.9% and it’s the measure that the Federal Reserve looks at most frequently because it tries to pull out the volatile components of food and energy. But Bailey looks at them more closely because food and energy are also large parts of the average monthly budget.

Consumers care about these price increases, said Bailey, but if their wages are keeping up, it’s not as much of an issue. However, wages have not been keeping up year-over-year. Real wages are down 3.6%, and that’s when you have demand destruction and an economic contraction, which often spills over into a recession.