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Inflation eases slightly in July

Article

Falling energy prices offset modest gains in other categories

Inflation rose 8.5% in July compared to a year ago, a slightly slower pace than last month. The decrease was mainly due to declining gasoline prices, which dropped 7.7%.

Prices were flat as energy prices declined 4.6%. This helped offset a 1.1% monthly gain in food prices and a 0.5% increase in shelter costs. Most economists expected the Consumer Price Index to rise 8.7%, so 8.5% was welcomed by investors.

The core CPI, which excludes food and energy prices because of their volatility, rose 5.9% annually and 0.3% monthly, compared to estimates of 6.1% and 0.5%.

Food continues to increase in price, with a jump of 10.9% over the last 12 months, a pace not seen since the late ‘70s. Electricity prices are up 15.2% compared to last year.

On the decline were used vehicle prices (0.4% monthly decline), apparel (0.1% decrease), and transportation services (0.5% decrease). Airline fares are down 7.8% compared to a year ago.

Overall, inflation is easing but is still near the highest level since the early ‘80s.

With the slightly improved inflation numbers, most economists think the Federal Reserve will limit the next interest rate hike to 0.5%.

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