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WASHINGTON, Aug. 10 (AP) Falling prices for gasoline, airline tickets and clothing helped Americans get a little bit out of the pain of last month’s high inflation, though overall price gains were only marginally off the 40-year highs reached in June. slow.
Consumer prices rose 8.5% in July from a year earlier, the government said on Wednesday, down from a 9.1% increase in June. On a monthly basis, prices were unchanged from June to July, the smallest increase in more than two years.
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Most travelers last month were relieved: The cost of a hotel room fell 2.7% from June to July, airfare prices fell nearly 8% and rental car prices fell 9.5%. Those prices fell after a sharp rise in prices over the past year after COVID-19 cases eased and travel rebounded. Airfare prices are still nearly 30% higher than they were a year ago.
A fall in travel-related prices last month helped bring down so-called core inflation, a measure that excludes volatile food and energy categories for a clearer picture of underlying inflation. Core prices rose just 0.3% from June, the smallest monthly gain since March. Compared with a year ago, core inflation in July was 5.9%, the same as the year-on-year increase in June.
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All in all, the July data raised hopes that inflation may have peaked after more than a year of consistent growth, which has strained household finances, worsened economic conditions for Americans, and led the Federal Reserve to sharply raise borrowing rates and lower rates. President Joe Biden’s public approval ratings. .
Nonetheless, core prices have slowed in the recent past, only to re-accelerate in the following months. Even if inflation continues to weaken, the Fed’s annual target of 2% is still a long way off.
“There are good reasons to think that inflation will continue to slow,” said Wells Fargo economist Michael Pugliese. “I think what got lost in that discussion was, how much slower?”
Even if consumer inflation slows to 4% — less than half its current level — that could still lead the Fed to keep raising rates, Pugliese said.
Americans are still suffering bigger price hikes than they have in decades. Grocery prices rose 1.1% in July and were up 13% from a year ago, the biggest year-over-year gain since 1979. Bread prices rose 2.8% last month, the biggest gain in more than two years. Rent and medical costs rose, but slightly less than in previous months.
Average salaries are growing faster than they have in decades, but not fast enough to keep up with these rising costs. As a result, some retired people have felt the need to return to work in recent months.
Among them is Charla Bulich, who lives in San Leandro, California. For the past six months, Bulich, 73, has worked several hours a week to care for an elderly woman because her Social Security and food stamps can’t cover her rising costs.
“I’m always over budget — that’s why I have to get a job,” Bulich said. “I wouldn’t even consider buying a hamburger or steak or anything like that.”
Now, she worries that she will lose food stamps in the coming months because of the extra income.
Micheal Altfest, director of community engagement at the Alameda County Community Food Bank in Oakland, said his organization is now delivering about 4.5 million pounds of food a month, up from less than 4 million pounds in January. The group also increased its budget by 66 percent for fuel costs. This is mainly because of higher gasoline prices, but also because it now uses more trucks to meet demand for food.
Altfest’s own rent has recently risen by 14 percent, forcing him to recalibrate his budget, he said.
“All these costs are going up at the same time,” he said. “People here are exhausted.”
Wednesday’s report boosted hopes that a modest slowdown in inflation could allow the Federal Reserve to slow the pace of short-term interest rate hikes when it meets in late September, and sent shares higher. How quickly and by how much the Fed raises borrowing costs has major implications for the economy: Larger rate hikes tend to reduce borrowing and spending by consumers and businesses, and make a recession more likely.
If the Fed doesn’t have to raise interest rates to keep prices in check, it has a better chance of achieving the elusive “soft landing,” where economic growth slows enough to curb high inflation but doesn’t lead to a recession.
Biden seized on the report in a speech on Wednesday, highlighting the flat monthly inflation data:
“I just want to say one number: zero,” he told reporters. “Today, we received news that our economy had zero inflation in July.”
Biden pointed to the drop in oil prices as a sign that his policies — including the massive release of oil from the Strategic National Reserve — are helping reduce the high costs of hurting household finances, especially for low-income American, Black and Hispanic households.
Republicans, however, have emphasized that the persistence of high inflation is the top issue in the congressional midterm elections, with polls showing that rising prices have led to a sharp drop in Biden’s approval ratings.
There are other signs that inflation may subside in the coming months. Americans’ expectations for future inflation have fallen, according to a survey by the Federal Reserve Bank of New York, which may reflect a drop in gasoline prices that has been apparent to most consumers.
Inflation expectations can be self-fulfilling: if people think inflation will remain high or worsen, they may take steps—such as demanding higher wages—that could push up prices in a self-perpetuating cycle. Companies then typically raise prices to offset higher labor costs. But the New York Fed survey found that Americans expect inflation to be lower one, three and five years ahead than a month ago.
Disruption in the supply chain is also easing, with fewer ships mooring at Southern California ports and lower shipping costs. Prices of commodities such as corn, wheat and copper fell sharply.
However, in categories with more price changes, such as rent, costs are still soaring. One in three Americans rents, and higher rent costs make many of them less money to spend on other items.
Stubborn inflation is not just an American phenomenon. Prices have risen in less developed countries such as the UK, Europe and Argentina.
In the UK, inflation surged 9.4% in June from a year earlier, a four-year high. Among the 19 countries that use the euro, it reached 8.9 percent in June compared to a year earlier, the highest level since the euro began keeping records. (Associated Press)
(This is an unedited and auto-generated story from the Syndicated News feed, the body of the content may not have been modified or edited by LatestLY staff)
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