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U.S. inflation rate eases in July

U.S. inflation rate eases in July

NEW YORK — The headline inflation rate in the United States was reported at 0.8 percent in July, while the core measure slipped to 2.2 percent, RBC Economics reported.

The headline and core inflation measures were little changed in July, with the all-items index steady while excluding food and energy, prices rose by 0.1 percent.

Prices rose for housing, medical care, and new motor vehicles; however, the overall transportation index fell in July on the back of a 4.7 percent drop in gasoline prices.

The year-over-year decline in gasoline prices was 19.9 percent in July, which was larger than in June but still marked significant easing in the pace of decline compared to January 2015 when gasoline prices posted a 35 percent drop.

Both food and clothing prices were flat on the month and up 0.2 percent and 0.3 percent, respectively, from year-ago levels.

“While inflation readings edged downward in July, inflation was not as weak as advertised by the 0.8 percent rise in the headline rate,” said Dawn Desjardins, assistant chief economist. “This low headline inflation rate belies underlying price pressures as the ex-energy rate inched downward to 1.9 percent, just a hair’s breadth off 2.0 percent.

“Furthermore, the ex-energy inflation rate was 2 percent for five of the previous six months and hit 2.1 percent in February,” she explained. “The turn in energy prices in 2016 is set to switch from being a weight on the annual inflation rate to pushing it higher. The easing of this base effect should stop driving a wedge between the headline and core rates, and we see both above 2.0 percent in the months ahead.

“For the Fed, increases in the headline rate will remove one obstacle to a rate hike, given that the labor market is within reach of full employment,” said Desjardins. “The other key factor staying the Fed’s hand is nervousness about international developments.

“On that front, markets appear to be unconcerned, and while the data point to the United Kingdom sinking fast, most other nations are bearing up,” she added. “Federal Reserve Chair Janet Yellen’s upcoming speech Aug. 26 at Jackson Hole will provide the Fed with the opportunity to update its outlook.

“Comments acknowledging an easing in concerns about both the global backdrop and the current low level of inflation may shift market expectations about the timing of the Fed’s next hike,” she said.

SOURCE: RBC Economics press release

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About Greg Gerber

Greg Gerber is a freelance writer and podcaster who has been writing about the RV industry since 2000. He is the former editor of RV Daily Report.

One comment

  1. There has not been a 2% annual raise in GDP in the last 8 years. Wages are down. No matter what we are told the economy is in bad condition. Healthcare costs have skyrocketed (what happened to the $2500 annual savings we were told of?). Of course although everything is great a minimal COLA for Social Security and military retirees will be minimal or follow the most recent ZERO. My mother always said “figures do not lie but liars can figure” and we sure have seen some great lies come from our federal government.

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