Falling gas prices help ease inflation in June, data centers driving up tech costs

On Tuesday, the government's latest report on inflation released, which revealed new information about how inflation is affecting the prices you pay.

The report released at 8:30 a.m. Tuesday. Overall, it showed inflation decreased 0.4% in June after rising 0.5% in May, which was largely down because of the lower cost of gas compared in the month of June. Food, shelter and recreation indexes continued to rise. 

Economist predicted Tuesday's report would show a small decrease in inflation during the month of June, partly because oil prices went down last month amid the ceasefire in Iran. 

While inflation cooled slightly, the renewed fighting with Iran could send prices climbing again. The spike in gas prices have also increased shipping costs for groceries and other goods.

The situation in the Middle East continues to change hour to hour amid renewed strikes. According to the Associated Press on Monday, the price for a barrel of Brent crude oil, the international standard, climbed 9.6% to $83.30 after the United States and Iran each said the Strait of Hormuz is under its control.

While the Consumer Price Index for consumers fell slightly due to energy prices falling 5.7% in June, the price index for food and shelter increased slightly. People are also paying more for recreation, which raised by 0.5% over the past month.

"The index for all items less food and energy rose 2.6 percent over the past 12 months. The shelter index increased 3.3 percent over the last year. Other indexes with notable increases over the last year include airline fares (+26.5 percent), medical care (+2.0 percent), recreation (+2.8 percent), and household furnishings and operations (+2.5 percent)," the report said.

Gas prices have fallen nearly 20% from their peak in late May but have rebounded in the past week, likely in response to renewed fighting in the Middle East. Gas prices averaged $3.87 a gallon nationwide Monday, up 7 cents from a week earlier. They averaged $4.09 a month ago, according to AAA.

Duke economist Connel Fullenkamp said the increased demand for data centers is also driving up prices for construction materials, technology and more. 

A recent study shows North Carolina already has more than 70 data centers, and dozens more will be under construction.

"We're starting to think that this surge in investment is long lived and is seriously kind of going to push prices up across the board," Fullenkamp said. "It's going to put upward pressure on prices into the foreseeable future. At least over the rest of this year and well into next year."

Economists have said massive investments in artificial intelligence infrastructure could also worsen inflation by increasing demand for memory chips, other semiconductors and electricity. Companies including Apple, Microsoft and Dell have announced price increases for laptops, tablets and video game consoles.

"The AI boom has created tremendous demand for memory chips and for processing units and these things are main components of a computer's cost. And this summer of course we've seen major manufacturers like Apple announce big price increases just because the prices of their component have gone up," Fullenkamp said.