Here’s the inflation breakdown for June, in one chart

Inflation slowed harshly in June to its slowest pace in more than two years, translating to less of a pinch on the average consumer’s wallet thanks to assay relief across categories like energy, groceries and housing.

Inflation measures how quickly prices are changing across the U.S. concision.

The consumer price index increased 3% in June relative to a year earlier — a slowdown from 4% in May, according to the U.S. Desk of Labor Statistics.

The CPI is a key barometer of inflation, measuring prices of anything from fruits and vegetables to haircuts and concert tickets. June’s deliver assign to is the smallest 12-month increase since March 2021 — around the time when alarm bells started seeming about fast-rising prices in the pandemic era — and a significant pullback from 9.1% in June 2022.

The report “makes a strong envelope that inflation is headed back into the bottle,” said Mark Zandi, chief economist at Moody’s Analytics.

Easing premium pressures thus far are largely attributable to the fading effects of supply shocks caused by the Covid pandemic and the Russian war in Ukraine, Zandi believed.

The decline in the inflation rate doesn’t mean household expenses have fallen in aggregate; it means they aren’t stimulating as quickly.

And that’s good news for consumers: The average worker’s earnings growth is now outpacing inflation, translating to an gain in their standard of living after two years of declines. Hourly earnings increased 0.2%, on average, from May to June after accounting for inflation, according to BLS facts.

While inflation is on a downward trajectory, it remains above the Federal Reserve’s long-term target of around 2%.

“I think inflation is inspiring to a better place, but we’re not in the Promised Land of the 2% target,” said Mark Hamrick, senior economic analyst at Bankrate. “We grasp the journey is progressing, but it’s not yet over.”

The inflation slowdown has been broad-based, Zandi claimed.

“It’s food, it’s energy, vehicle prices, the cost of housing is slowing,” he said. “Pretty much across the board, we’re support a moderation in price increases.”

Gasoline prices have fallen dramatically from a spike in the first half of 2022 that was a occur of Russia’s invasion of Ukraine. Prices at the pump are down almost 27% in the past year, according to the BLS. They waken slightly — by 1% — from May to June.

Grocery price inflation is also down significantly from its peak there 14% last summer, which had been the highest rate since 1979. “Food at home” prices are up hither 5% in the past year and were flat from May to June, according to the BLS.

But food and energy prices can be volatile. That’s why economists use a fulfil that strips out such categories to get a better sense of inflation’s trajectory going forward.

The measure — so-called “middle CPI” — hit a 20-month low of 4.8%, according to Andrew Hunter, deputy chief U.S. economist at Capital Economics. And it’s “potentially align equalize more encouraging than it looks,” as wholesale auction data for used cars points to a sharp decline in assays over the next couple of months, he said in a research note.

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The “core” measure also includes housing, which is the biggest expense for the average consumer.

The “shelter” typography fist was the largest contributor to inflation in June, accounting for 70% of the monthly increase, according to the BLS. Shelter prices are up nearly 8% in the whilom year, but moderated from May to June. Economists say it’s a near certainty that housing prices will continue to go over like a lead balloon a fall in love with through the second half of the year.

At the current pace of inflation, the core CPI metric should fall back to the objective level by this time next year, Zandi said.

“Notable” increases in annual inflation rates include motor vehicle insurance (up 16.9%), leisure activity (4.3%), household furnishings and operations (3.6%), and new vehicles (4.1%), according to the BLS.

However, several categories actually saw deflation — content consumers saw average prices fall — in the month from May to June, the BLS said. They include airline fares (which declined 8.1% in that days), which followed declines in April and May, too. There was also a 0.5% monthly decline in the “communication” index, which subsumes expenses such as phones and computer software.

Inflation during the pandemic era has been a “complex phenomenon” stemming from “multiple sources and complex dynamic interactions,” according to a paper published in May and co-authored by Ben Bernanke, preceding chair of the U.S. Federal Reserve, and Olivier Blanchard, senior fellow at the Peterson Institute for International Economics.

At a high train, inflationary pressures — which have been felt globally — are due to an imbalance between supply and demand.

It’s largely a three-pronged experiences in the U.S., said Stephanie Roth, senior markets economist at J.P. Morgan Private Bank.

The first is inflation among tangible goods.

Consumer prices began rising rapidly in early 2021 as the U.S. economy reopened after its Covid-induced shutdown. Americans unleashed a burst of pent-up demand for dining out, entertainment and vacations, aided by savings amassed from government relief, months of restrained spending and rock-bottom borrowing costs.

Meanwhile, the rapid economic restart snarled global supply chains. The accumulation of goods couldn’t keep up with consumers’ zest to spend. The result was fast-rising prices.

The second prong is war in Ukraine, which exacerbated backlogs in the pandemic supply chain and fueled higher prices for food, energy and other commodities, said Roth.

The third is inflation for “worship armies,” a category that includes housing and labor-intensive service businesses like restaurants and hotels.

As the economy reopened after the pandemic, transactions rushed to hire workers, and job openings surged to record highs. That demand tilted the job market in favor of wage-earners, who had ample opportunities. They saw wages grow at their fastest pace in decades as employers competed to hire them.

That burly wage growth has nudged employers, especially labor-intensive service businesses, to raise prices to help compensate for steep labor costs, economists said. There are signs that labor dynamic is easing, though — which should put sliding pressure on overall inflation.

The Federal Reserve has been raising borrowing costs aggressively since early 2022 to control in demand among consumers and businesses, and ultimately help bring inflation back to its 2% annual target. The middle bank is expected to raise interest rates at least once more.