US CPI increased to a 13-year high of 5.3% (Y-o-Y) in June, beating the consensus estimates by 50 bps (4.9%), while PPI surged to 10 year high of 7.3% (Y-o-Y).

Insight: CPI grew by 0.6% in June-20 while PPI contracted by -0.7% in the same month. Therefore, the increase in CPI and PPI is largely due to base effects.  Apart from low base effects, a continued rebound in travel related services and the pick up in economic recovery are driving the jump in CPI. Inflation in 'Used cars and Trucks' is at 45.2%  in June-21 (vs 29.7% in May-21) followed by 'Energy Commodities' at 44.2% (vs 54.5% in May-21). The core CPI surged to a 19-year high of 4.5% in June-21 (vs 3.8% in May-21). In PPI, the recent increase in crude oil prices, and resumption of uptrend in commodities have also contributed to its jump (apart from low base effect). Inflation in PPI is at 7.3% for June-21 beating the consensus estimates by 60 bps (6.7%). The spread between PPI and WPI is at 1.9%  which is close to the all time high of 2%.

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