U.S. Inflation subtle in July, extending a slowdown

“Every bit of information on inflation going forward, especially leading up to the next couple of Fed meetings is key to predicting the future of the U.S. economy” said Keith Knutsson of Integrale Advisors.

The CPI (consumer-price index), is a measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food and medical care. It is calculated by taking price changes for each item in the predetermined basket of goods and averaging them. The Labor Department reported the index increased 0.1% in July from the previous month. This excludes categories with increased volatility such as food and energy.

Economists surveyed by The Wall Street Journal had expected overall and core prices to both advance 0.2% in the following month. Although this might not seem to be a significant increase, overall consumer prices climbed 1.7% in the past year. 

Some indexes showed signs of weakness while others excelled. The shelter index, a measure of rent, mortgage payments, and lodging prices rose 0.1% in July, the smallest increase its seen since March, 2017. On the other hand, other segments showed gains. The clothing index rose 0.3% in July after declining for the past four months, despite expected discounts associated with brick-and-mortar store closures, such as Sears, Kmart, and Target.

The report is the Federal Reserve Board’s latest indication at a major inflation gauge. The task designated to the central bank is to achieve maximum sustainable employment and stable prices. With unemployment at 4.3%, it appears the Fed is beginning to reach its target. Inflation, however, has continued to frustrate Americans.

The Fed’s preferred measure of inflation, the personal-consumption expenditures price index, remained unchanged in June, the second consecutive evaluation where the numbers remained flat. Furthermore, it was up 1.4% in June from a year earlier and has dropped for four consecutive months on an annual basis, from 2.2% in February.

A separate Labor Department report showed average weekly earnings for private sector workers, adjusted for inflation, increased 0.2% in July from the prior month. From a year earlier, inflation-adjusted weekly earnings were up 1.1%. U.S. Consumer Prices Rose Slightly in July.