Inflation rose 8.5% in July and prices cooled, but remain close to all-time highs

Rampant inflation eased in July for the first time in months, but prices remained near their highest levels in 40 years.

The Labor Department said Wednesday that the consumer price index, a broad measure of prices for daily necessities including gasoline, food and rent, rose 8.5% year-on-year, below the 9.1% year-on-year surge recorded in June. It remained flat for a month from June.

These figures are below both the 8.7% headline figure and the 0.2% monthly profit forecast by Refinitiv economists, and are welcome for the Fed as it seeks to contain price rises and keep consumer demand in check. Could be a sign. Equity futures rose on a better-than-expected report, with the Dow Jones Industrial Average up 0.9% and S&P 500 futures up 1.2%.

So-called core prices, which strip out the more volatile measures of food and energy, rose 5.9% from a year earlier, below economists’ forecast of 6.1% but in line with July figures. Core prices were also weaker than expected, rising 0.3% on a monthly basis. This is a slight increase over his April, May and June Inflation is starting to ease Its control over the economy.

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Still, experts warn that while July’s slowdown is a step in the right direction, inflation remains painfully high and a return to the Fed’s 2% target may take time. doing.

“We’re not entirely out of the woods,” said Peter Earle, a research fellow at the American Bureau of Economic Research, a nonprofit think tank. “There is a long way to go and a lot of things could happen before we return to the 1.5% to 2.5% annual inflation rate that Americans are accustomed to.”

Rampant inflation is putting severe financial pressure on most U.S. households, forcing them to pay more for everyday necessities such as food and rent. disproportionately borne by low-income Americans who are greatly affected by

American workers have seen significant gains in wages in recent months, but inflation has eroded them significantly. Real average hourly earnings in July fell 0.5% from the previous month, due to higher consumer prices, according to the Labor Department. On a yearly basis, July’s real earnings actually fell by 3%.

“While the boost to the overall economic outlook is welcome, wages have plummeted in real terms despite the drop in gasoline prices alone adding about $400 million to household balance sheets. For consumers in the market, easing inflation will sound hollow,” RSM said. Chief Economist Joe Bruce Elas.

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Last month, US households: falling energy prices, contributed to lower headline inflation. Energy costs in July fell 4.6% from the previous month, but remain 32.9% higher than they were a year ago, while gasoline prices fell 7.7% in July. That’s a 44.9% increase from last year.

But other price gains were widespread in July and inflation remained stubbornly high. The Food Index rose 1.1%, giving him a 10.9% 12-month rise, the highest since May 1979.

Shelter costs, which account for about 40% of the rise in core inflation, rose 5.7%, the fastest since February 1991.

Rent increased by 0.7% monthly and 6.3% annually. Rising rents are a cause for concern, as rising housing costs have the most direct and severe impact on household budgets. Another data point, which measures how much a homeowner would pay for comparable rent if he didn’t buy a home, was up 0.6% in July from the previous month.

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While it’s fair to say that we may have observed an overall inflation peak in June 2022, the risk to the economic outlook remains inflation and [Fed] “Our estimate is that it will take two to three years for inflation to approach the Fed’s 2% inflation target,” Mr Brusuelas said.