Despite inflation gradually decreasing, consumers are still feeling the financial strain of rising prices. This ongoing challenge continues to impact their budgets significantly.
The goodish news on inflation is that the Consumer Price Index for July rose “only” 3.2% year-over-year, according to the Bureau of Labor Statistics. That was higher than the 3% reading seen in June, as well as the first uptick in prices in 13 months. Comparisons against prior-year periods in which the pace of inflation was more volatile contributed to July’s increase.
The latest report on July’s Consumer Price Index (CPI) has garnered quite a bit of attention, and experts are weighing in on the topic of inflation. This piece will provide you with a comprehensive and captivating overview. Prepare yourself for an engaging discussion that takes perplexity and burstiness to new heights, all while maintaining the necessary detail and specificity. I’ll be your guide through this conversation, using a conversational tone that feels like it was penned by a fellow human being. Get ready for a casual and relatable read, peppered with personal pronouns, everyday language, and rhetorical questions. So, what are the experts saying about inflation in the July CPI report? Let’s dive in and find out.
On a monthly basis, CPI rose 0.2% last month, or the same rate as seen in June.
Importantly, core CPI, which excludes volatile food and energy prices, posted its smallest back-to-back monthly increase in two years. July’s core CPI rose 0.2% after rising 0.2% in June.
On an annual basis, core CPI increased 4.7%. Although that was in line with economists’ estimates, core inflation remains uncomfortably sticky. Moreover, it’s still well above the Federal Reserve’s 2% target.
According to Phillip Colmar, a global strategist at MRB Partners, the majority of the decrease in the overall inflation rate in the United States has already taken place. However, the inflation rate for core consumer prices is predicted to keep decreasing in the upcoming months. It is highly unlikely, though, that core inflation will drop close to the central bank’s target of 2% unless there is a recession.
Although the underlying CPI situation may not be overly optimistic, it is safe to acknowledge that the most detrimental inflation experienced by consumers, comparable to the turbulent economic periods under Presidents Carter and Reagan, reached its highest point over a year ago.
So, let’s talk about the not-so-great news regarding inflation. The cost of things is going up and up, like never before in our lifetimes. It’s a pretty perplexing situation, to say the least. I mean, prices are just skyrocketing, and it’s not something we’re used to seeing. It’s like the whole inflation game has been turned up to the max, and it’s really bursting our bubbles. This burstiness means that prices are increasing rapidly and unpredictably, catching us off guard. It’s a bit overwhelming if you ask me. We’re definitely in uncharted territory here. And this inflation issue is something we need to pay close attention to. It’s not just a blip on the radar, it’s a real concern. But hey, let’s try to make sense of it together. So just hold tight, because this is going to be quite the ride.
Between 2000 and 2020, annual inflation in the U.S. averaged just 2.1%. (Recall that the Federal Reserve’s inflation target is 2%.) Perhaps we didn’t appreciate it enough at the time, but the first two decades of the 21st century were a sort of goldilocks era for inflation: not too fast and not too slow.
Take a moment to check out a few of the subcategories mentioned in the most recent CPI report. It’s pretty eye-opening to see just how much things have transformed. Now, let’s focus on the specific goods and services that are really putting a strain on people’s wallets.
Are you feeling the pinch of rising prices? It seems that inflation is having a particularly strong impact in certain areas. Prices keep going up, and it’s becoming a major concern for many. Let’s take a closer look at where inflation is hitting hardest and how it’s affecting people’s wallets.
The cost of living is skyrocketing, leaving people perplexed and struggling to keep up. It’s like a burst of unexpected expenses hitting you all at once. The situation is becoming more and more challenging, and it’s important to understand the specific areas where inflation is hitting the hardest.
In some regions, housing prices have soared to unprecedented levels, making it increasingly difficult for people to afford decent homes. Rent prices are through the roof, and finding an affordable place to live has become a real challenge. This surge in housing costs has put tremendous pressure on individuals and families, leaving them scrambling to make ends meet.
Food prices have also been rising sharply, putting an extra strain on already tight budgets. From the cost of fresh produce to everyday essentials, grocery shopping has become a significant financial burden for many. Families are having to rethink their meal plans and cut back on certain items just to make the grocery bill work.
Fuel and transportation costs are another area where inflation is hitting hard. Rising gas prices have a ripple effect, impacting not only drivers but also businesses that heavily rely on transportation. Commuting is becoming more expensive, and the extra costs are eating into people’s budgets, leaving them with less disposable income for other necessities.
So, the squeeze of rising prices is causing perplexity and burstiness in these specific areas. Housing, food, and transportation costs are skyrocketing, making it increasingly difficult for people to make ends meet. Understanding the extent of inflation’s impact can help individuals and families better manage their finances and find ways to mitigate the effects. It’s time to take a closer look at how rising prices are affecting us all.
One of the largest contributors to inflation in July was in housing. No surprise there. The shelter component, which counts sundry costs for keeping a roof over one’s head, rose 0.4% last month and 7.7% year-over-year.
Indeed, the housing market has experienced a decline in both home prices and rental rates since June 2022. However, several factors contribute to the sustained high levels of the owners’ equivalent rent component in the Consumer Price Index (CPI), including the upward trend and the retrospective nature of the data. Despite these downward movements, the owners’ equivalent rent remains elevated.
Then there’s food, prices of which rose 0.2% in July, accelerating from a 0.1% increase in June. On an annual basis, food inflation rose 4.9% in July, driven by a 7.1% increase in food away from home and a 3.6% rise in prices for food at home.
Drilling down a bit, the index for cereals and bakery products rose 7% over the 12 months ending in July. Dairy and related products saw prices rise 1.3% over the past year, while nonalcoholic beverages became 5.4% more expensive.
Restaurant meals also got pricier, rising 7.1% over the past year.
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Over the last year, transportation services have become more expensive, putting a strain on consumers’ wallets. Prices in this sector have experienced a considerable 9% increase, further impacting people’s budgets.
In better news, all energy prices tumbled 12.5% on an annual basis (after Russia’s invasion of Ukraine caused them to spike last year). Gas prices fell 19.9% over the past 12 months, while fuel oil plunged 26.5%.
Elsewhere, prices for new vehicles ticked down by 0.1% in July vs the prior month, a period in which they remained unchanged. Used car and truck prices fell 1.3% in July after slipping 0.5% in June. Over the past 12 months, used car and truck prices are down 5.6%.
Simply put, inflation on a yearly basis was mainly caused by increased expenses for housing and food. The good news is that these price hikes are starting to decrease, which is a positive development.
“Inflation in the United States remains on a downward trajectory,” says Sarah House, senior economist at Wells Fargo Economics. “Over the past three months, the core CPI has increased at a 3.1% annualized rate, the slowest pace since September 2021.”
Well, it’s safe to say that the rate at which prices are increasing is slowing down, but let’s be real here, it’s going to be a while before we can experience the good old days when inflation was at a comfortable 2%. It’s like trying to catch a shooting star – it’s gonna take some time and patience.
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