Consumer prices continued edging up, in July, but the annual inflation rate did not follow suit.
According to figures released this week by the Labor Department, consumer prices ticked up 0.1% last month, about what forecasters were expecting. Over the year, prices were up 3.4%, according to a report from USA Today, meaning they still went up, but at a slower rate. However, after a rise triggered by the war with Iran, which drove the price of gas up, the annual inflation rate actually dropped from 4.2% in May to 3.5% in June.
The USA Today report indicated deceleration in year-over-year price increases could be good news for consumers, although their paychecks still may not be keeping up. Average hourly earnings for employees, according to the outlet, on private nonfarm payrolls rose just 3.2% over the year in July.
Cooling annual inflation combined with a weak July jobs report – initial reports showed the U.S. economy losing 23,000 jobs — should lower expectations for a September rate increase, according to Seema Shah, Principal Asset Management’s chief global strategist, though she said it “does not put it completely to bed.”
“With the Strait of Hormuz still shut, upside inflation risks will remain top of mind for the foreseeable future,” Shah told USA Today in a note. “We expect no change in rates this year but cannot dismiss the elevated risks of a hike later in the year if energy disruptions are sustained, while the threat of an AI induced rise in inflation also cannot be ignored.”
