Aug. 10 (UPI) — The government will issue its latest inflation data on Wednesday and the figures are expected to show that the hot surge in prices is beginning to slow, thanks mainly to falling gasoline prices.
The Commerce Department will release its Consumer Price Index, which is a key inflationary gauge that measures the rise or decline in prices from month to month. Last month, it showed an increase of 1.3% from May to June, the largest monthly increase in 2022.
Since then, however, gasoline prices in the United States have fallen like a rock. Prices reached an all-time record average of more than $5 per gallon in mid-June — but the national average on Wednesday was $4.01, according to AAA.
Also expected to cool off hot-running inflation is the slow untangling of supply chain problems, which were aided on Tuesday when President Joe Biden signed the CHIPS and Science Act, legislation that aims to increase domestic production of semiconductor chips to ease U.S. over-reliance on foreign-made chips.
Most economists expect Wednesday’s Consumer Price Index to show a slight increase of 0.2% from June to July. They also expect that price increases measured over the past 12 months ending in July will be 8.7%.
“You have about four drivers of inflation right now,” Aneta Markowska, chief economist at Jefferies, told CNBC. “You have commodity prices. That’s going away. You have supply chain issues. That’s going away.”
President Joe Biden signs the CHIPS and Science Act of 2022 on the South Lawn of the White House in Washington on Tuesday. The bill aims to increase domestic chip production and solve supply chain troubles that have influenced inflation over the past year. Photo by Bonnie Cash/UPI
“But you’re still left with housing and the labor market, and that’s going to show up in services inflation,” Markowska added. “And that’s driven by shortages in housing and labor. That’s not going away anytime soon until the Fed manages to destroy demand and that hasn’t happened.”
The Federal Reserve has raised key interest rates by a half-point or more at its last three policy meetings. The higher-than-usual hikes are intended to slow spending, which is the primary driver of inflation.
Nonetheless, the supply chain issues have dogged consumer prices in the United States and around the world. Some analysts believe that the problem, which was exacerbated by COVID-19, is finally beginning to improve.
Liz Ann Sonders, chief investment strategist for Charles Schwab & Co. Disclosures, said Wednesday that supply chain pressures have eased globally given the decline in supplier delivery time components within several major countries’ purchasing managers’ index.
“Key to watch … is trends in stickier components (like shelter), meaningful for Fed, given several median measures are in strong uptrends,” Sonders tweeted.
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