July CPI Report Shows Inflation Gauge Rose 3.2%, Less Than Expected  

• The consumer price index rose 3.2% from a year ago in July, a sign that inflation has lost at least some of its grip on the U.S. economy. Prices accelerated a seasonally adjusted 0.2% for the month, in line with the Dow Jones estimate, the Bureau of Labour Statistics (BLS) reported Thursday. Nonetheless, the annual rate was slightly below the 3.3% forecast though higher than in June.
• Excluding volatile food and energy prices, core CPI also increased 0.2% for the month, matching the estimate and equating to a 12-month rate of 4.7%, the lowest since October 2021. The annual rate for the core also was slightly below a Dow Jones consensus estimate of 4.8%.
• Almost all of the monthly inflation increase came from shelter costs, which rose 0.4% and were up 7.7% from a year ago. Food prices also climbed 0.2% on the month, and the BLS said energy costs increased just 0.1% even though crude oil prices surged during the month and prices at the pump jumped as well.
• Used vehicle prices declined 1.3% and medical care services were off 0.4%. Airline fares fell 8.1% on the month, the same as in June, and are down 18.6% from a year ago after surging in the early days of the Covid pandemic.
• Together, the latest batch of data shows that while inflation has come well off its 40-year highs of mid-2022, it is still considerably above the 2% level where the Federal Reserve would like to see it and high enough that cuts in interest rates are unlikely anytime soon.
• The elevated rates have yet to put a dent in economic growth: The first half of 2023 had seen GDP post gains of 2% and 2.4% in the first two quarters, respectively, and the Atlanta Fed is tracking third-quarter growth of 4.1%. Payroll gains have been slowing but are still solid, and unemployment is near its lowest since late 1969.
• With that being said more economists are beginning to expect the U.S. can avoid a recession despite the aggressive rate hikes. Bank of America, Goldman Sachs and JPMorgan Chase all recently have forecast that a contraction is becoming less likely.

(Source: Reuters)