The torrid pace of inflation slowed in July for the first time in months, but prices remained near the highest level in 40 years.
The Labor Department said Wednesday that the consumer price index, a broad measure of the price for everyday goods including gasoline, groceries and rents, rose 8.5% in July from a year ago, below the 9.1% year-over-year surge recorded in June . Prices were unchanged in the one-month period from June.
Those figures were both lower than the 8.7% headline figure and 0.2% monthly gain forecast by Refinitiv economists, a welcoming sign for the Federal Reserve as it seeks to cool price gains and tame consumer demand. Stock futures rose on the better-than-expected report, with the Dow Jones Industrial Average climbing 0.9% and S&P 500 futures gaining 1.2%.
So-called core prices, which strip out the more volatile measurements of food and energy, climbed 5.9% from the previous year, below the 6.1% forecast from economists but matching the reading from July. Core prices also rose less than expected, rising 0.3% on a monthly basis – a smaller increase than in April, May and June, an encouraging sign that inflation is starting to loosen its stranglehold on the economy.
Experts cautioned that while the July slowdown is a step in the right direction, inflation is still painfully high and could take some time to return to the Fed’s preferred target of 2%.
“We’re not out of the woods by a long shot,” said Peter Earle, a research fellow at the non-profit think tank the American Institute for Economic Research. “There’s a long way to go, and a lot can happen, before we get back down to that 1.5% to 2.5% annual inflation area that Americans are used to.”
Scorching hot inflation has created severe financial pressures for most US households, which are forced to pay more everyday necessities like food, gasoline and rent. The burden is disproportionately borne by low-income Americans, whose already-stretched paychecks are heavily impacted by price fluctuations.
Although American workers have seen strong wage gains in recent months, inflation has largely eroded those: Real average hourly earnings decreased 0.5% in July from the previous month when accounting for higher consumer prices, according to the Labor Department. On an annual basis, real earnings actually dropped 3.0% in July.
This is a developing story. Please check back for updates.