By Robert Hughes
AIER’s daily price fell 0.6 percent in July after a 2.4 percent jump in June. The July EPI broke a string of 19 consecutive increases since December 2020. From a year ago, the daily price index 13.0 percent, lower than the 12-month gain of 14.6 percent through June.
Motor fuel prices, the main driver of monthly changes in the daily price index due to the large weight in the index and the volatility of the underlying commodities, led the decline with a price decline of 7.6 percent for the month (on a seasonally unadjusted basis). Six other components showed price declines in July, including a 1.0 percent decline in recreational reading materials, a 0.9 percent decline in Internet services and a 0.6 percent decline in cable and satellite services. A total of seven categories showed declines in July, the highest number since March.
Access to events led to price increases (by 2.1 percent). The two biggest positive contributors in July were food at home (contributing 1.4 percent and 35 basis points) and food away from home (adding 0.7 percent and 11 basis points for the month). A total of 15 categories posted price gains, the lowest since March.
The daily price index including apparel, a broad measure that includes clothing and shoes, fell 0.6 percent in July. Over the past year, the daily price index, including apparel, rose 12.4 percent for the period ended June, up from a 12-month gain of 13.9 percent.
Apparel prices fell 1.1 percent on a seasonally-adjusted basis in July. Apparel prices are volatile on a month-to-month basis. A year ago, apparel prices rose by 5.1 percent.
The consumer price index, which includes everyday purchases and infrequently purchased, big-ticket items and contracted durable goods, was unchanged in July on a seasonally-adjusted basis. Energy posted a 4.5 percent decline on a seasonally-adjusted basis while food posted a 1.1 percent increase. Over the past year, the consumer price index rose 8.5 percent, down from 9.1 percent in the 12-month period through June.
The consumer price index excluding food and energy rose 0.3 percent for the month (not seasonally adjusted), but the 12-month change came in at 5.9 percent. The 12-month change in core CPI was just 1.3 percent in February 2021 and 2.3 percent in January 2020 before the pandemic.
After seasonal adjustment, the core rose 0.3 percent for the month while the CPI was unchanged in July. Within the core, core commodity prices were up 0.2 percent in July and 7.0 percent a year ago. There were significant increases for the month in new vehicles (0.6 percent) and home furnishings (0.6 percent), while used cars and trucks posted a 0.4 percent decline.
Prices of core services rose 0.4 percent for the month and 5.5 percent a year ago. Among major services, gainers were health insurance (up 2.2 percent versus 20.6 percent a year ago), motor vehicle repair (up 1.1 percent versus 8.1 percent a year ago), motor vehicle insurance (up 1.3 percent versus 7.4 percent a year ago), medical care ( 0.4 per cent per month and 5.1 per cent a year ago), and owner-occupier equivalent rent (which accounted for 23.5 per cent of CPI, up 0.6 per cent per month and 5.8 per cent from a year ago).
The main component indices to decline in July were stay away from home (-2.7 percent for July but still up 1.0 percent from a year ago) and transportation services (-0.5 percent for July but up 9.2 percent from a year ago). Among transportation services, airline fares fell 7.8 percent for the month but were up 27.7 percent from a year ago, and car and truck rentals fell 9.5 percent for the month versus 11.9 percent from a year ago.
Price pressures for many goods and services in the economy are high due to shortages of supplies and materials, logistical and supply chain problems, and labor shortages and turnover. However, there are some early signs that some of the pressures are easing.
Still, persistently high price increases distort economic activity by influencing consumer and business decisions. Furthermore, price pressures have led to an intensification of the Fed’s tightening cycle, increasing the risk of a policy misstep. The fallout surrounding Russia’s invasion of Ukraine continues to disrupt global supply chains. All these are maintaining a high level of uncertainty for the economic outlook. Caution is necessary.
Editor’s note: This article’s summary bullets were selected by the Seeking Alpha editors.