After a year of relentless increases that crushed Americans, created a political firestorm for President Biden, and forced the Federal Reserve to hike interest rates at the fastest pace in decades, the cooler-than-expected inflation data for July fueled hopes that consumer prices peaked earlier this summer.
This comes after a year in which these increases caused the Federal Reserve to raise interest rates at the fastest pace in decades.
The year-over-year change in the consumer price index was 8.5% in July, which is lower than the 9.1% increase that was recorded in June and is larger than the decline that economists predicted.
The index did not change at all every month as a result of declines in the cost of oil, gasoline, and airfares, which were offset by rises in the cost of food and rent.
Prices increased by 5.9% in July, which is the same increase as the previous month when more volatile metrics such as food and gasoline are excluded.
Inflation is still painfully high, and it may take some time for it to return to the levels that it was at before the pandemic, which was around 2%, even though the slowdown is likely a welcome respite for the Fed as it tries to wrestle inflation under control, experts cautioned that inflation remains painfully high.
Wage Gains on Average in the United States Are Still Being Erased by Inflation
Peter Earle, a research scholar at the nonprofit think tank known as the American Institute for Economic Research, stated that “We’re not out of the Woods by any stretch of the imagination.”
Before we get back down to that 1.5% to 2.5% annual inflation area that Americans are used to, there is still a long way to go, and a lot may happen before then.
Even if COVID-19 and Russia’s war in Ukraine is continuing to wreak havoc on the global economy, there is still a great deal of doubt as to whether or not inflation has reached its highest point.
Previously, economists have projected that the inflation wave had crested, only to be proven wrong the next month when the actual data came in.
However, in the following months, a moderation in the skyrocketing rate of price increases is forecasted, even if there is no telling how long it would take for things to return to “normal.”
A breakdown of July’s inflation: where are Americans being hard hit the most by raising prices?
Seema Shah, the chief global strategist at Principal Global Investors, said that within the next month or two, there would be clearer evidence that inflation has reached its high, but there will also be evidence that the decrease is painfully slow.
“Unfortunately, households will, unfortunately, continue to feel the significant strain that increased pricing pressures are placing on their budgets, while the continuance of wage increases will take its toll on corporate profit margins,”
Inflation In The US
On August 10, 2022, a shopper may be seen doing their grocery shopping in Millbrae, California.
Extremely high inflation has resulted in severe financial pressures being placed on most households in the United States.
These households are being forced to pay more for essentials that they use daily, such as food and rent.
Low-income Americans, whose salaries are already stretched thin, bear a disproportionate share of the hardship since price variations have a significant influence on their purchasing power.
Although employees in the United States have witnessed significant salary rises in recent months, such gains have been mostly offset by inflation.
According to data provided by the Labor Department, real average hourly earnings experienced a 0.5% decline in July when compared to the previous month.
This decline was driven by higher consumer prices. Real earnings really took a 3% nosedive on an annual basis in July.
According to the chief economist at RSM, Joe Brusuelas, “while the boost to overall economic prospects is welcome, the easing inflation will ring hollow with many down-market consumers whose wages are falling in real terms.”
This is the case even though the decline in gasoline prices alone has added approximately 400 million dollars back to household balance sheets.
On July 16, 2022, blueberries and cherries will be available for purchase at a farmers market located in the Fort Greene area of Brooklyn, New York.
The cost of gasoline in the United States is currently 32.9% higher than it was this time last year, even though energy prices decreased month-to-month during July.
Both the price of food, which has increased by a staggering 13.1% over the past year, marking the most significant increase in food costs since 1979 and the price of rent, which has increased by 6.3%, is becoming increasingly difficult for households to afford.
According to a study conducted by the Republican members of the Joint Economic Committee, the current rate of inflation is the highest it has been in several decades. As a result, the typical American is having to pay an additional $717 per month.
According to the research, “Prices did not change from June to July 2022; nevertheless, prices grew 13.3% from January 2021 to July 2022, which resulted in a rise in costs of $717 for the typical American household in July 2022 alone.”
Even if there were no more price increases at all, the inflation that already took place between August 2021 and July 2022 would result in an additional cost of $8,607 for the typical American household.
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President Biden, who has been on the defensive for months over soaring prices, welcomed the cooler-than-expected report that was released on Wednesday as evidence that inflation “may be beginning to reduce.”
This comes after months of being on the defensive over skyrocketing costs. However, Vice President Biden admitted that the fight against inflation may not be ended just yet.
According to what he said, “We could face greater headwinds in the months ahead.” “Our work is by no means completed.”
