A customer buys eggs at a Kroger grocery store on August 15, 2022 in Houston, Texas.
Brandon Bell | Getty Images
July Consumer Price Index The report finally showed a sign of potential relief – inflation rose less than expected from a year ago and was flat on the month, meaning a basket of items and services is generally remained at the same price.
But some elements have fallen, on a monthly and weekly basis, potentially signaling that inflation has passed its peak and may be cooling.
This is good news for consumers who have been squeezed by higher prices and are looking for any sign of relief. Some of the major items whose prices have fallen include eggs, milk and gasoline.
“Fuel inflation was really big and it’s going to have a pretty significant impact on consumers and their spending habits,” said John Leer, chief economist at Morning Consult. “I think that’s actually a good thing for the economy.”
Many of the items that have fallen are related to food and energy, often the most volatile costs consumers face.
Grocery store staples fell. large white eggs costs, on average, $2.14 for a dozen, during the week of August 15-21, according to the USDA. That’s a whopping 60 cents down from the previous week, when the average was $2.74 per dozen.
The average price of a gallon of milk rose from $3.24 to $3.16 during the August 8-12 period from the previous month, and the average price of butter fell to $3.67 compared to $4.68 during the same period, according to USDA data.
Chicken breast prices also slipped on a weekly basis during the August 8-12 period, but other parts of the chicken are also in decline – chicken wings prices are trending down and now cost less than before the pandemic, according to data from the Ministry of Agriculture.
Outside of food, declines were observed in consumer goods and energy-related services.
Indeed, oil prices are often subject to strong price fluctuations as the balance between supply and demand shifts. This year, the war between Russia and Ukraine upset that balance, and the price of oil soared as countries stopped buying from Russia, a major exporter.
However, oil prices have come down, which has lowered the cost of energy and especially gasoline. The national average for a gallon of regular gasoline is $3,918 Friday, according to AAA. While that’s higher than a year ago, it’s a solid drop from the $4,495 consumers were paying for gasoline a month ago, and a steep drop from the recent high of $5.016 reached in June.
It has also potentially affected another sector of the economy that has seen prices fall month on month: air fares. The average price of a domestic plane ticket fell to $295 in August from $332 in July, according to travel site Hopper. This also corresponds to the average price of a domestic ticket during the same month in 2019.
Aside from fuel costs, this drop in ticket prices could be due to waning consumer demand, according to Kevin Gordon, senior director of investment research at Schwab.
“It could be demand destruction,” he said, adding that the reopening of pandemic shutdowns was inflating the price of things as consumers rushed to resume vacations. Now that the holiday season is winding down, that demand has diminished.
Of course, a month of falling prices in certain categories is not a trend.
Slowing price increases — and declines in the costs of some items and services — may mark the start of declines, but more months of data would be needed to be sure.
“I think it’s way too early to start taking a victory lap,” Leer said, adding that consumers should expect to live in a world with high inflation for a year and a half to two years.
Additionally, it is important to remember that falling prices or slowing inflation may ultimately signal that the US economy is slowing down.
“You want the price pressures to be relieved, but the end goal with that is probably that we’re getting closer to a recession,” Gordon said. As the Federal Reserve continues to raise its benchmark interest rate, it wants the economy to slow but will try not to tip the United States into a recession that would lead to job losses.
Additionally, the prices of other common items have remained stubbornly high and continue to rise. The price of most fruits, for example, continues to remain high and even increase week after week, according to USDA data. Rapid changes are also normal — even though dairy fell through Aug. 12, milk and butter prices rebounded through Aug. 19, the USDA found.
Coffee prices rose 3.5% from June to July, according to the Bureau of Labor Statistics. Housing costs such as rent have also remained high and are among the most difficult to reduce, Gordon noted.
Still, seeing the prices of everyday items drop is good for consumers and sentiment.
“I think consumers increasingly believe inflation is going to come down,” Leer said.
Denial of responsibility! newsnaveen.com is an automatic aggregator around the global media. All the content are available free on Internet. We have just arranged it in one platform for educational purpose only. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, all materials to their authors. If you are the owner of the content and do not want us to publish your materials on our website, please contact us by email – email@example.com. The content will be deleted within 24 hours.