Inflation seems to be slowing down after the recent report from the Labor Department, but prices remain incredibly high compared to this time last year.
After months and months of record-breaking spikes in the cost of living, better than anticipated numbers sent the stock market soaring. The good news in today’s report mainly comes from a drop in gas prices. And while this month’s rate is a bit better than economists expected, there’s still a long way to go.
“I came here because the prices are a lot cheaper than other places and it’s going to be going down a lot more too,” said one California driver looking for relief.
Not only are gas prices dropping, but this month’s inflation report also points to lower costs for new and used cars, travel, and clothing. Still, inflation remains a big concern, up a whopping 8.5% in July compared to a year ago, although the Biden administration is trying to paint a rosy picture.
“Today, we received news that our economy had zero inflation in the month of July, zero percent,” President Biden said. “Here’s what that means, the price of some things went up last month while the price of other things went down by the same amount. The result, zero inflation but people are still hurting.”
Biden’s touting the zero percent number deals with what’s known as core inflation, one of several lenses used to view the economy. That figure ignores food and energy prices which can often be more volatile. Mark Hamrick, Sr., an economic analyst with Bankrate, says Biden is using the numbers to play politics.
“If you look at the year-over-year increases, the Consumer Price Index is up 8.5% on the headline level, not the 9.1% we saw last month,” Hamrick said. “The core rate, excluding food and energy, is up 5.9% from last year. So, we’re coming down in these headline numbers but we’re not at zero with respect to where we were a year-to-date or over the past year.”
Food prices were hit big time, reaching highs not seen since the 1970s. The bill at a restaurant rose 0.7% over last month. And grocery store prices rose 1.3%. Eggs alone jumped 47%. After months of turmoil, the best economic news remains in the labor market.
“I think the good news we’ve had on the job market – meaning we are still hiring a lot of people and the unemployment rate matching the 50-year low and 3.5%,” Hamrick said. “Inflation may have peaked but we don’t have full confirmation on that because we need several more months’ worth of data. There’s reason for hope but any sort of relief in our pocketbooks and bank accounts, I think that’s welcome news.”
There’s still another month’s worth of data before the Federal Reserve’s next policy meeting, which is around the third week in September. Hamrick says they might look directionally good with hope coming from dropping gas prices which should permeate the food category next month.
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