Inflation report today: CPI data shows consumer prices jumped 8.5% in July, slipping from a 40-year high

WASHINGTON– Falling gasoline prices gave Americans a slight break from the pain of high inflation last month, although the surge in overall prices has slowed only slightly from the four-decade high reached in June.

Consumer prices jumped 8.5% in July from a year earlier, the government said on Wednesday, compared with a 9.1% year-on-year jump in June. Month-over-month prices remained unchanged from June to July, the smallest such increase in more than two years.

Yet prices are rising for a wide range of goods and services, making the situation worse for most Americans. Average paychecks are rising faster than they have in decades, but not fast enough to keep up with accelerating costs for items such as food, rent, automobiles and medical services.

President Joe Biden has pointed to falling gasoline prices as a sign that his policies — including large releases of oil from the country’s strategic reserve — are helping to reduce higher costs that have strained governments. finances of Americans, especially for low-income and black Americans. and Hispanic households.

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Still, Republicans point to persistently high inflation as one of the main issues in the midterm congressional elections, with polls showing that high prices have sent Biden’s approval ratings plummeting.

On Friday, the House is set to give final congressional approval to a revived tax and climate package pushed by Biden and Democratic lawmakers. Economists say the measure, which its proponents have dubbed the Inflation Reduction Act, will have only a minimal effect on inflation over the next few years.

Although there are signs that inflation may ease in the coming months, it is likely to remain well above the Federal Reserve’s 2% annual target until next year or even until in 2024. Chairman Jerome Powell said the Fed should see a series of monthly cuts. readings of underlying inflation before considering suspending rate hikes. The Fed has raised its benchmark short-term rate in its past four rate-setting meetings, including a three-quarter point hike in June and July — the first such large increases since 1994.

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A blockbuster jobs report for July that the government released on Friday – with 528,000 jobs added, wages rising and an unemployment rate at a half-century low of 3.5% – bolstered expectations that the Fed will announce another three-quarter point hike at its next meeting in September. Robust hiring tends to fuel inflation because it gives Americans greater collective purchasing power.

A positive sign, however, is that Americans’ expectations for future inflation have declined, according to a survey by the Federal Reserve Bank of New York, likely reflecting lower gasoline prices that are very visible to most consumers.

Inflation expectations can be self-fulfilling: if people think inflation will stay high or get worse, they are likely to take actions – such as demanding higher wages – that can drive up prices in a self-perpetuating cycle. Companies then often increase their prices to compensate for the increase in their higher labor costs. But the New York Fed’s survey found that Americans expect lower inflation in the next one, three and five years than a month ago.

Supply chain issues are also easing, with fewer ships docked off Southern California ports and shipping costs falling. Prices for commodities such as corn, wheat and copper fell sharply.

Yet in categories where price changes are more rigid, such as rents, costs continue to rise. A third of Americans rent their homes, and higher rental costs leave many with less money to spend on other items.

Data from Bank of America, based on its accounts receivable, shows that rent increases have hit young Americans particularly hard. Average rent payments for so-called Gen Z renters (those born after 1996) jumped 16% in July from a year ago, while for baby boomers the increase was only by 3%.

Stubborn inflation is not just an American phenomenon. Prices have jumped in the UK, Europe and less developed countries like Argentina.

UK inflation rose 9.4% in June from a year earlier, a four-decade high. In the 19 countries that use the euro, it reached 8.9% in June compared to a year earlier, the highest since the start of the registration of the euro.

Copyright © 2022 by The Associated Press. All rights reserved.


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