July’s consumer price index report finally showed a sign of potential relief – inflation ticked up less than expected from a year ago, and was flat on the month, meaning that a basket of items and services generally stayed the same price.
However, some items are falling on a weekly and monthly basis. This could indicate that inflation is cooling down.
Consumers who are feeling squeezed due to higher prices will be happy to hear this news. The top-selling items that have seen their prices drop include gasoline, eggs and milk.
John Leer (chief economist, Morning Consult) stated that “fuel inflation was very large and that’s going have a pretty significant impact on consumers spending patterns and their spending habits.” I think it’s a positive thing for the economy.
Grocery aisle prices down
Many of these items have seen a decline in demand are related to energy and food, which can often be one of the most volatile expenses that consumers face.
Grocery store staples are down. Large white eggsAccording to USDA, a dozen cost on average $2.14 per dozen during week August 15-21. This is a huge 60-cent drop from last week’s $2.74/dozen.
The average cost of a gallon milk fell from $3.24 to $3.16 between August 8-12, from the previous month. Butter prices dropped from $4.68 to $3.67 to $3.67 during that same period. per USDA data.
Chicken breast prices also slipped on a weekly basis during the period of Aug. 8-12, but other parts of the chicken are declining as well – chicken wing prices have been trending downAccording to data from USDA, the cost of these items is now lower than it was before the Pandemic.
Prices of fuel dropped because oil is cheaper
Consumer goods and energy services, which are not food-related, can also see declines.
Because oil prices can be subject to large price swings due to shifts in the balance of supply and demand, Russia’s war with Ukraine caused this imbalance to shift and the oil price spiked as countries stopped buying oil from Russia.
However, the oil price has fallen, which means that energy costs have dropped. particularly gasoline. AAA reports that the average national price of a gallon regular gasoline was $3.918 at Friday. Although it is higher than it was last year, this represents a significant decline in gas prices from $4.495 a month ago and an abrupt drop from June’s high of $5.016.
Consumers are increasingly believing that inflation will fall.John Leerchief economist at Morning Consult
That also potentially affected another area of the economy that saw a price dip month over month – airfares. Hopper reports that the August average price for a domestic flight ticket dropped to $295 from $332 in July. This is also in line with what the domestic average ticket cost in August of 2019
According to Kevin Gordon (senior investment research manager at Schwab), this drop in ticket prices may not be due to fuel costs.
“That could lead to demand destruction,” he stated, noting that pandemic lockdowns being reopened inflated prices as more people rush to book vacations. As vacation season winds down, this demand is decreasing.
A trend is not created in one month.
One month with prices falling in one category is not considered a trend.
The slowdown in price increases – and dips of costs of some items and services – may mark the beginning of declines, but more months of data would be needed to know for sure.
Leer stated that it was too soon to celebrate a win, and consumers can expect to live in an inflation-prone world for at least the next year.
Additionally, falling prices and/or a slowing of the inflation rate may be signs that the U.S. is experiencing a slowdown in its economy.
Gordon said, “You want price pressures to be relieved. But what’s the end goal? That we are getting closer and more likely to a depression.” While the Federal Reserve is increasing its benchmark rate of interest, they want the economy to slow down. However, the Federal Reserve won’t allow the U.S. to enter a recession that could lead to job loss.
Prices for other commonly used items are also stubbornly high, and they continue to climb. According to USDA data, the price of fruit continues to rise week after week. Swift changes are normal as well — even though dairy fell through Aug. 12, prices of milk and butter ticked back up through Aug. 19, USDA found.
According to Bureau of Labor Statistics (Bolster of Labor Statistics), coffee prices increased 3.5% in July compared to June. Gordon observed that housing costs like rent are still high and difficult to reduce.
Consumers can still be encouraged by the trending down of prices for common products.
Leer said, “I believe consumers are becoming more convinced that inflation will come down.”