Consumer Inflation in the US has Declined, Continues to be High.

by Wall Street Rebel | Michael London | 08/11/2021 11:43 AM
Consumer Inflation in the US has Declined, Continues to be High.

Inflation dropped in July, but remained at a 13-year high on an annual basis, as supply-chain disruptions triggered by the epidemic continue to cause havoc on the economy.


On Wednesday, the Bureau of Labor Statistics published that consumer price inflation slowed somewhat in July but remained strong.

Consumers' prices in the United States rose at a more moderate pace in July, but not by enough to provide substantial relief from the cost increases weighing on consumer confidence and driving infrastructure policy debate.

Although some of the variables that led to the inflation spikes of the previous months, such as used car prices, started to fall back down to earth in July, the costs of other items, such as food in both grocery stores and restaurants, continued to rise at an alarming pace.

In this way, the inflationary anomalies of the pandemic era are served as a timely reminder that they at currently not going away.

Price increases across the economy due to the reopening of the economy and the continuation of supply chain bottlenecks will keep economists and investors on their toes, as well as officials at the Federal Reserve.

Maintaining price stability, which is one of the central bank's basic goals, is important. The rise in inflation observed during the outbreak may force the Fed to tighten monetary policy sooner than later. During the 12 months ending in July, core consumer prices rose 4.3 percent, a little drop from the 4.4 percent rise reported in June. Core consumer prices remove more volatile components such as food and energy. After considering seasonal fluctuations, prices rose by 0.5 percent overall and 0.3 percent excluding food and energy items in only one month in July alone.

Overall, the pace of growth was at its lowest point in nearly three months, and the core index was at its slowest point in almost three months since March.

Inflationary pressures on the cost of housing, food, energy, and new cars all contributed to the increase in the index. July's drop in the price index for used cars, which stayed virtually unchanged from the previous month, contributed to the overall decline in the index.

In light of the fact that used car prices have increased in recent months as consumers are willing to pay a premium for mobility. New automobiles are in short supply owing to a shortage of computer chip manufacturing; this came as a surprise.

Over the last year, the index of used vehicles has risen by almost 42 percent, making it the second most significant increase in the economy after the increase in the price of gasoline.

Almost all of the pricing measures taken in the month of July, including those for food, energy, housing, and new vehicles, contributed to the rise in prices.

There has been a reduction in the cost of flying travel as well as auto insurance.

The price index for plane tickets has decreased after having increased considerably in recent months as the reopening of the airports has proceeded more rapidly, according to other recent transportation news.

According to the Bureau of Labor Statistics, the cost of dining out rose by 0.8 percent in February, marking the largest monthly rise seen since February 1981.

Restaurants are hiking their prices to keep up with growing food costs, as well as their wages, to retain staff in light of the industry's labor shortage.

Along with the increasing cost of dining out, eating at home has grown more expensive: the index of prices for food consumed at home rose 0.7 percent in July, somewhat slower than in June but faster than in the first half of the year, as the cost of meat, poultry, fish, and eggs increased.

Given the trillions of dollars in financial aid that have already been poured into the economy since the breakout of Coivid-19, it may be more difficult for Biden to get unanimous Democratic support for an additional $3.5 trillion in social spending.

Following a study conducted by Bloomberg Economics, it was discovered that "reopening-sensitive categories" were losing their statistical significance in July's CPI data and that they were contributing the least amount to the monthly rise since March.

Many companies, including Colgate-Palmolive Co., Procter & Gamble Co., and Kimberly-Clark Corp., have increased — or plan to raise — consumer prices to offset increasing raw material and production costs to the Economic Policy Institute.

According to the Consumer Price Index (CPI), American consumers see increased eating out, groceries, and personal care costs. In July, the price of meals eaten away from home rose by 0.8 percent, the most significant monthly rise since 1981, according to the Bureau of Labor Statistics.

Due to extensive savings, consumers who are ready to spend have shifted their behavior to bargain hunters in recent months.

Alternatively, spending patterns may change if the surge in demand connected with the reopening of the airport fades and if concerns about the delta variant lead economic activity to decrease due to the delta variant.

Even though shelter expenses are considered a more structural component of the CPI and account for approximately a third of the total index, they rose by 0.4 percent in March, accounting for more than half of the monthly rise in the core index.

During the same time period, the index of rental rates rose by 0.2 percent, while the owners' equivalent rent, which measures price appreciation for newly purchased homes, increased by 0.3 percent.

Despite the fact that rents and house prices have increased dramatically in recent months, it will take some time before these price increases are reflected in official inflation measures.

During the month of July, the cost of accommodation away from home, which includes hotel stays, continued to rise, increasing by 6 percent.

While salaries have increased in recent months, rising consumer costs are reducing the purchasing power of the average American.


                    July's consumer price index up 0.5%, meeting estimates




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