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Consumer Prices Continue Strong Annual Increases in July, But Show Signs of Slowing

  • Consumer Price Index up 0.5 percent from June and 5.4 percent from July 2020
  • Core inflation eases to 0.3 percent following a 0.9 percent increase in June
  • Energy costs continue to tick up and remain significantly elevated compared to a year ago

Summary by Dirk Langeveld

The Consumer Price Index continued to show a substantial increase in prices on an annual basis, according to data released by the Department of Labor’s Bureau of Labor Statistics. At the same time, core inflation monthly increases were showing signs of slowing down.

In July, the index rose 0.5 percent from June and 5.4 percent from July 2020. The gains were down from a 0.9 percent monthly increase in June and matched the previous month’s annual increase.

Core inflation, which excludes more volatile measures of food and energy prices, rose 0.3 percent in July – down from 0.9 percent in June. The annual increase of 4.3 percent was down slightly from 4.5 percent in the previous month.

  • The energy index was up 1.6 percent from June and 23.8 percent from July 2020, with the gasoline index increasing 2.4 percent from the previous month and 41.2 percent from the previous year
  • The food index increased 0.7 percent on a monthly basis and 3.4 percent on an annual basis
  • The index for used cars, which have seen major demand during the COVID-19 pandemic, slowed to a 0.2 percent monthly gain but was still up 41.7 percent from July 2020
  • Prices decreased on a monthly or annual basis in areas such as vehicle insurance, airfare, transportation services, and medical care commodities
  • The Federal Reserve is continuing to keep interest rates low and conduct monthly emergency bond purchases in the expectation that inflationary trends will be transitory and driven largely by a resumption in economic activity
  • There are further expectations that monthly increases will ease as businesses work out supply chain difficulties and that annual price gains will fall once they no longer reflect pandemic-driven pricing

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