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Consumer prices rose 8.5% in July, less than expected as inflation pressures eased a bit


Prices consumers pay for a wide range of goods and services rose 8.5% in July from a year ago, a pace that slowed from the previous month in large part due to falling gasoline prices.

On a monthly basis, prices were flat as energy prices fell 4.6% and gasoline fell 7.7%. That offset a 1.1% monthly increase in food prices and a 0.5% increase in accommodation costs.

Economists surveyed by Dow Jones had expected CPI to rise 8.7% year-on-year and 0.2% monthly.

Excluding volatile food and energy prices, the so-called core CPI increased by 5.9% year-on-year and 0.3% monthly, compared with estimates of 6.1% and 0.5%, respectively.

Even with the lower-than-expected numbers, inflationary pressures remain strong.

The soaring food index took the 12-month gain to 10.9%, the fastest pace since May 1979. Avocados are up 26.4% over the past year, eggs are up 38% and coffee is up more than 20. %.

Despite the monthly decline in the energy index, electricity prices are still up 1.6% and up 15.2% from a year ago. The energy index rose 32.9% from a year ago.

Used car prices fell 0.4% month on month, while clothing prices also fell 0.1% and transportation services fell 0.5% as air fares fell 1.8% in January-July. 8% from a year ago.

Markets reacted positively to the report, with futures tied to the Dow Jones Industrial Average rising more than 400 points and government bond yields plummeting.

“Things are moving in the right direction,” said Aneta Markowska, chief economist at Jefferies. “This is the most encouraging report we’ve had in a long time.”

The report is good news for workers, who have seen real wages rise 0.5% monthly. Average hourly earnings adjusted for inflation are still down 3% from a year ago.

Temporary accommodation costs, which account for about a third of the CPI share, continued to increase and increased by 5.7% in the past 12 months.

People shop at a grocery store on June 10, 2022 in New York City.

Spencer Platt | beautiful pictures

The numbers suggest inflation pressures are easing somewhat but remain near their highest levels since the early 1980s.

Congested supply chains, excess demand for goods and services, and trillions of dollars in pandemic-related monetary and fiscal stimulus have combined to create an environment of high prices and low prices. Slowing economic growth causes headaches for policymakers.

The July drop in gas prices offered some hope after prices at the pump rose above $5 a gallon. But gasoline is still up 44% from a year ago and fuel oil is up 75.6% year-on-year, despite falling 11% in July.

Federal Reserve officials are using the formula of raising interest rates and associated monetary policy tightening in hopes of beating inflation figures that are running ahead of their 2 percent long-term goal. The central bank has raised its benchmark borrowing rate by 2.25 percentage points so far in 2022, and officials have given strong indications that more hikes are on the way.

There was some good news earlier this week when a survey by the New York Fed indicated that consumers had softened their future inflation expectations. But for now, the rising cost of living remains a problem.

While inflation rose, gross domestic product fell in the first two quarters of 2022. The combination of slow growth and rising prices was linked to stagnant inflation, while two consecutive quarters of negative GDP responded. The widely used definition of recession.

Wednesday’s inflation numbers could keep the Fed cool.

Recent comments from policymakers pointed to a third consecutive 0.75 percentage point rate hike at the September meeting. Following the CPI report, market prices reversed, with the traders are now predicting a better chance of a lower 0.5 percentage point drop.

“At the very least, this report should ease the pressure on the Fed at its next meeting,” Markowska said. “They’ve said they’re willing to go up 75 basis points if they have to. I don’t think they have to anymore.”



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