(CNN)After a surge of the previous month, the benchmark measure of inflation slowed in July to faint The painful inflation facing Americans could ease in the coming months.
The Producer Price Index, which measures the price paid to producers for goods and services, rose 9.8% in July year-on-year. That's a slowdown from his jump of 11.3% year-on-year in June, according to data released Thursday by the Bureau of Labor Statistics.
Monthly wholesale prices fell 0.5%, down from June's revised 1% month-on-month gain.
"Combining this with the news of the Consumer Price Index is certainly much more encouraging than expected. It gives us hope that the worst inflationary pressures have passed," Mark said. Hamrick said. Senior Economic Analyst at Bankrate.
These declines are generally seen as a sign of progress in the fight against inflation, largely due to falling energy prices to record highs. ing. But economists warn that yet another hot inflation report will send a strong signal that the economy is not yet out of the inflationary forest.
Producer prices are usually more volatile than consumer prices. This is because cost fluctuations are not perfectly reflected to consumers. But these costs are partly reflected in how much Americans pay for goods and services, and high numbers are generally seen as a precursor to rising prices for consumer goods.
Eric Sterner, chief investment officer at Apollon Wealth Management, said the drop in wholesale prices bodes well for consumers suffering from the shock of stickers.
"This is certainly welcome news," he said. "I think it's a more valuable indicator than the consumer price index because it's a leading indicator of what consumers will see in the future. We're far from out of the woods, but the right
Energy Moves the Needle
Falling very high energy prices get much credit for lower inflation. The 1.8% drop in wholesale commodity prices in July was the biggest monthly decline since the April 2020 lockdown plunge and was a function of lower energy prices, according to the BLS. The agency also attributed 80% of the commodity price drop to a 16.7% drop in gasoline prices over the June-July period.
"What this reflects is that gasoline demand is a little more resilient than people think," said energy equities analyst at CFRA Research. One Stewart Glickman said, noting that Americans are refraining from driving. Respond to price spikes in spring and early summer pump .
Apart from gasoline, petroleum-related products, from jet fuel to diesel to petroleum-based plastics, play a major role in the manufacture and transportation of all types of goods. For better or worse, oil prices have a bigger impact on prices than many realize, Glickman said.
"Anything that is purchased in a store or shipped is the fact that someone is paying to move that item," he said. "It affects the cost of a lot of the things we consume. It affects not just when we need to roll up to the pump and fill it up again."
Federal Reserve Needle Pulls String
This week's inflation data reflect gradual improvement, but the US economy Rising prices remain a concern for businesses and policy makers, making for a very challenging environment.
"We still have a long way to go to normalize inflation," Mr. Sterner said.
This raises the stakes for the Federal Reserve, which has promised to raise interest rates to keep inflation in check and not trigger a recession in the process.
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Most analysts now expect the Fed to hike rates by 50 basis points (0.5 percentage points) next month, following a historic 75 basis point hike. . As of Monday, the majority expected a 75-point gain.
With more than a month to go before the Federal Reserve's reconvening of policymakers, Hamrick said the volatility in interest rate expectations is likely to continue.
"The Fed has been on a journey here to get the rate adjustment right," he said. "It's an uncertain and volatile environment, so they inherently need to make up for this more than ever."
