Inflation DOWN From 9.1% to 8.5% as Energy Prices Decline

The Consumer Price Index (CPI) for July was released today and the year-over-year total decreased from 9.1% to 8.5% as gasoline prices decreased in July.Β  Core was unchanged at 5.9%.

Inflation – 12 Month Period (Ending July 2022)

As the chart below demonstrates, gas prices have materially declined in July and into August.Β This should have a beneficial impact on August CPI data due out on September 13th.

US Average Gas Prices

Core inflation’s (less Energy and Food) annual totalΒ will have upward pressureΒ as August (2021) monthly totals roll off and August 2022 data replaces it.Β The red bars are August 2021 while the green bars are the August 2022 estimates using the prior 6 months average.Β  When the green bar exceeds the red, higher inflation is likely.

Core Inflation – EXCLUDING Energy and Food

The energy price bumps of 11% in March 2022 and 7.5% in June 2022 will remain in the CPI calculation for the next 12 months and won’t drop off until April 2023 and July 2023. It will give a continuing appearance that we have a high annual inflation rate due to these two single months’ spikes. Given how job growth is robust and inflation is above desired levels, the Federal Reserve will likely continue with its announced future rate increases into the foreseeable future.

Bill Knudson, Research Analyst Landco ARESC