WASHINGTON (AP) — Energy prices fell last month, raising hopes that inflation may have eased and price gains may have peaked.
Consumer prices rose 6.3% year-on-year in July after registering an annual rise of 6.8% in June, according to a Friday report from the Department of Commerce closely monitored by the Federal Reserve. It was the largest increase since then. After a surge in June, it fell last month.
So-called core inflation, which excludes volatile food and energy prices, rose 4.6% year-on-year last month after rising 4.8% in June. The decline, along with last month’s decline in the Labor Department’s consumer price index, suggests that inflationary pressures may be starting to ease.
On a monthly basis, consumer prices actually fell by 0.1% from June to July. According to the Department of Commerce report, core inflation he rose 0.1%.
In the spring of 2021, inflation began to rise sharply as the economy rebounded from the brief but devastating coronavirus recession a year ago at an alarming rate. A surge in customer orders overwhelmed factories, ports and freight yards, leading to delays, shortages and higher prices. Inflation is a global problem, especially since Russia’s invasion of Ukraine pushed up global food and energy prices.
In the United States, the Department of Commerce’s Personal Consumption Expenditures (PCE) Index is less well-known than the Labor Department’s Consumer Price Index (CPI).
However, the Fed prefers the PCE index as an indicator of inflationary pressure. One reason for this is that the commercial index attempts to measure how consumers adapt to rising prices.
CPI shows higher inflation than PCE. Last month, for example, the CPI was running at an annual pace of 8.5% after he recorded his 40-year high of 9.1% in June. One reason is that the Labor Department index puts more weight on this year’s skyrocketing rents.
The Commerce Department reported Friday that after-tax personal income for Americans increased by 0.3% from June to July after adjusting for inflation. fell in June. Consumer spending last month increased by 0.2%, affected by rising prices.
The Fed was slow to respond to rising inflation, believing it to be a temporary consequence of supply chain bottlenecks. But as prices continued to rise, the US central bank acted aggressively, raising its benchmark interest rate four times since March.