Please ensure Javascript is enabled for purposes of website accessibility
Fed's Preferred Inflation Gauge Shows a Modest Rise in Latest Sign of Slowing Price Increases
By admin
Published 11 months ago on
August 31, 2023

Share

Getting your Trinity Audio player ready...

WASHINGTON — An inflation gauge closely tracked by the Federal Reserve remained low last month, adding to signs of cooling price increases and raising the likelihood that the Fed will leave interest rates unchanged when it next meets in late September.

Thursday’s report from the Commerce Department showed that prices rose just 0.2% from June to July, the third straight modest increase. Compared with a year earlier, prices rose 3.3% in July, up from a 3% annual increase in June. The year-over-year figure, though, is down sharply from the 7% peak it reached a year ago, though still above the Fed’s 2% inflation target. It rose partly because of much smaller price increases a year ago.

Individual Item Costs

Among individual items, the cost of groceries rose just 0.2% from June to July, though they’re up 3.5% over the past year. Gas prices increased 0.3% in July but remain 22.3% lower than they were a year earlier.

Among autos, new-car prices edged down 0.1%; they’re still up 3.6% from July of last year. Used car prices fell 1.4% from June to July and are down 5.5% compared with 12 months earlier.

The latest data follows other recent reports that suggest the economy and the job market may be slowing enough to cool inflation pressures. The number of advertised job openings, for example, tumbled in July, and fewer Americans are quitting their jobs to seek better opportunities. Both trends ease the pressure on companies to raise pay to find and keep workers — a move that tends to perpetuate inflation as employers raise prices to offset their higher labor costs.

Core Inflation

Excluding volatile food and energy prices, “core” inflation ticked up just 0.2% from June to July, the same as from May to June. Compared with a year earlier, core prices rose 4.2%, up slightly from 4.1% the previous month. The Fed’s policymakers closely monitor core prices as a telltale signal of where inflation might be headed.

“It is becoming harder to dismiss the improvement in the inflation numbers as mere noise,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics. Annualized core inflation in the past three months, compared with the previous three months, increased at the slowest pace since March 2021, Shepherdson said.

Economists and Wall Street traders increasingly believe the Fed will leave its benchmark interest rate unchanged when it next meets Sept. 19-20. If inflation and the economy continue to moderate, it might not raise rates at its subsequent meeting in November, either. If so, that would leave the central bank’s July rate increase — the 11th since March 2022 — as the final one.

Fed Chair’s Message

Some economists noted that the increase in year-over-year inflation rates underscored Fed Chair Jerome Powell’s message in a high-profile speech last week at an annual conference of central bankers in Jackson Hole, Wyoming: That inflation remained too high and the central bank had to remain vigilant. Still, policymakers typically pay closer attention to monthly and quarterly inflation data than to yearly figures, which can be lagging indicators.

The inflation gauge that was issued Thursday, called the personal consumption expenditures price index, is separate from the better-known consumer price index. Earlier this month, the government reported that the CPI rose 3.2% in July from a year earlier, down from a peak of 9.1% in June 2022.

Consumer Spending

Thursday’s report also showed that Americans spent more in July, with consumer spending rising a healthy 0.8% from June to July, up from a 0.5% gain from May to June. The increase suggests that the U.S. economy is growing at a solid pace in the current July-September quarter.

Though consumer spending drives most of the U.S. economy, the Fed is seeking to slow it down as a way to restrain inflation. Too fast an acceleration of spending could lead the central bank to raise rates even further. At the same time, the Fed is trying to avoid slowing the economy so much as to cause a deep recession.

Powell referred to the tricky dynamics surrounding the economy and inflation in his Jackson Hole speech. He stressed that the Fed would “proceed carefully” as it considers its next moves.

“Two months of good data,” Powell said, “are only the beginning of what it will take to build confidence that inflation is moving down sustainably toward our goal. We can’t yet know the extent to which these lower readings will continue.”

European Inflation

In Europe, inflation largely held steady in July at a time when the European Central Bank, like the Fed, is grappling with whether to raise its key interest rate at its next meeting in September. The consumer price index for the 20 countries that use the euro currency rose 5.3% in July from a year earlier, the same as for June, the EU statistics agency Eurostat said. Core inflation eased from 5.5% to 5.3%.

US Spending in July

In the United States, spending in July jumped around the July 4th holiday, according to data from the Bank of America Institute, which tracks consumer activity through its credit and debit cards. And a pickup in online spending occurred in mid-month, likely because of Amazon’s “prime” shopping day, the institute said.

Later in the month, entertainment spending surged, probably reflecting the popularity of the “Barbie” and “Oppenheimer” movie releases, the Institute said.

Those trends might have pulled some spending away from major retailers, some of which reported sharp sales declines in the spring and early summer, including Macy’s, Foot Locker and Kohl’s. Yet many discount retailers, including Walmart, TJ Maxx and Dollar Tree, reported growing sales. That suggested that lower- and middle-income shoppers, feeling squeezed by inflation and higher borrowing costs, are seeking out bargains and focusing more on necessities.

Economists said last month’s jump in consumer spending was driven mainly by one-time factors, that are unlikely to be repeated. Utility spending leapt as hot weather led many Americans to crank up air conditioning. Back-to-school shopping also likely fueled some spending.

RELATED TOPICS:

DON'T MISS

Monday Breaks the Record for the Hottest Day Ever on Earth

DON'T MISS

Republican Leaders Urge Colleagues to Steer Clear of Racist and Sexist Attacks on Harris

DON'T MISS

Delta Air Lines Expects Outage-Related Cancellations to End by Thursday, CEO Says

DON'T MISS

Rebuilding Fresno Unified Aquatics Programs Will Help Students, Promote Water Safety

DON'T MISS

Netanyahu Seeks Support for War in Gaza With Speech to Congress but Sparks Protests and Boycotts

DON'T MISS

Where and When Can You See REO Speedwagon in the Valley?

DON'T MISS

49ers GM: We Have No Intention of Dealing Brandon Aiyuk

DON'T MISS

Reality Show Contestant Apologizes After Eating Protected Bird

DON'T MISS

Wildfires Send About 25,000 Fleeing From Canadian Rockies’ Largest National Park and Nearby Town

DON'T MISS

Surprise Blast of Rock, Water and Steam Sends Dozens Running for Safety in Yellowstone

UP NEXT

UPS Boosts Volume in US for First Time Since 2022, but Profit and Revenue Slide

UP NEXT

With US Vehicle Prices Averaging Near $50K, General Motors Sees 2nd-Quarter Profits Rise 15%

UP NEXT

Stock Market Today: Wall Street Ticks Higher as Big Tech Recovers Following Worst Week in Months

UP NEXT

NATO Strengthens Defense Against Russia with 500K Troops Ready to Deploy

UP NEXT

Merced County Employees Vote to Authorize Strike Amid Budget Crisis

UP NEXT

Ten Commandments Won’t Go in Louisiana Classrooms Until at Least November as Lawsuit Plays Out

UP NEXT

US Army Honors Nisei Combat Unit That Helped Liberate Tuscany From Nazi-Fascist Forces in WWII

UP NEXT

Wired Wednesday: The Battle Over South Fresno Industrial Growth

UP NEXT

Fresno State Weighs in on City’s Industrial Battle: Be Wary of University’s Data

UP NEXT

Is Inflation Finally Corralled? Powell Says Federal Reserve Believes It’s Close

Rebuilding Fresno Unified Aquatics Programs Will Help Students, Promote Water Safety

1 hour ago

Netanyahu Seeks Support for War in Gaza With Speech to Congress but Sparks Protests and Boycotts

1 hour ago

Where and When Can You See REO Speedwagon in the Valley?

4 hours ago

49ers GM: We Have No Intention of Dealing Brandon Aiyuk

16 hours ago

Reality Show Contestant Apologizes After Eating Protected Bird

17 hours ago

Wildfires Send About 25,000 Fleeing From Canadian Rockies’ Largest National Park and Nearby Town

17 hours ago

Surprise Blast of Rock, Water and Steam Sends Dozens Running for Safety in Yellowstone

17 hours ago

Review: Candlelight Delivers an Enchanting Performance

17 hours ago

Fresno State’s All-Time Sacks Leader Will Be Inducted Into Football Ring of Honor

18 hours ago

Watch Out, Fresno. That ‘Summer Cold’ Might Be COVID.

19 hours ago

Monday Breaks the Record for the Hottest Day Ever on Earth

Monday was the hottest day ever globally, beating a record set the day before, as countries around the world from Japan to Bolivia to the Un...

13 mins ago

13 mins ago

Monday Breaks the Record for the Hottest Day Ever on Earth

39 mins ago

Republican Leaders Urge Colleagues to Steer Clear of Racist and Sexist Attacks on Harris

1 hour ago

Delta Air Lines Expects Outage-Related Cancellations to End by Thursday, CEO Says

1 hour ago

Rebuilding Fresno Unified Aquatics Programs Will Help Students, Promote Water Safety

1 hour ago

Netanyahu Seeks Support for War in Gaza With Speech to Congress but Sparks Protests and Boycotts

4 hours ago

Where and When Can You See REO Speedwagon in the Valley?

16 hours ago

49ers GM: We Have No Intention of Dealing Brandon Aiyuk

17 hours ago

Reality Show Contestant Apologizes After Eating Protected Bird

MENU

CONNECT WITH US

Search

Send this to a friend