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July Consumer Price Index Shows Cooling Inflation; Recession Fears Diminished

Maddy Ryley, Managing Editor
July Consumer Price Index Report Shows Cooler Inflation Than Expected

CHICAGO — The most recent July Consumer Price Index (CPI) report from the U.S. Bureau of Labor Statistics found that the CPI in July increased 3.2%, slightly higher than the 3% seen reported for June and the first increase in more than a year, but still less than the 3.3% increase that was expected.

Banks have cut the odds of a recession as inflation keeps cooling, with J.P. Morgan raising the U.S. economic estimate of GDP growth to 2.5% from its original 0.5% estimate and no longer forecasting a recession. Goldman Sachs lowered its probability of a recession by 5%, and the U.S. Federal Reserve also is no longer forecasting a recession.

The airfare index fell for the fourth month in a row, declining 8.1% over the month of July, after decreasing 8.1% in June as well. When comparing the index to a year ago, airfare is down 18.6% according to the Bureau’s data.

Real wages increased 0.3% from June and are up 1.1% from July 2022. The increase in real wages is credited to a 0.4% increase in average hourly earnings and an increase of 0.2% in the CPI Index month-over-month. The unemployment rate changed little, at 3.5%, compared to 3.6% in June.

There were some other goods and services that saw price inflation decreases in July when compared to June, including used vehicles (-1.3%), electricity (-0.7%) and medical care services (-0.4%). Rising just 0.2% in July was the index for all items less food and energy, which is the same percentage that it rose in June. The energy index is down 12.5% for the 12 months ending in July.

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The cost of shelter was the main contributor to the monthly inflation increase, as it accounted for more than 90% of the increase, and motor vehicle insurance also was a noted contributor. According to Bloomberg’s reporting, despite the high shelter costs in the July CPI report, inflation is cooling as shelter prices are already weakening from July levels.

Following the release of the CPI report early on Aug. 10, the Nasdaq Composite, S&P 500 and Dow Jones Industrial all saw gains of 1% or more, but as the day went on, they dropped off from those highs in the morning.

Despite the CPI reaching 3.2% for July, the general economic outlook remains optimistic that inflation is still coming down, and a recession is unlikely.

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