Inflation Remained Hot in July, But May Be Starting to Cool

August 11, 2021

The prices that Americans pay for everyday goods and services rose again in July as the economic recovery continued, but the increases showed signs of slowing as pandemic-related supply disruptions sorted themselves out.

The consumer price index (CPI), which tracks the prices Americans pay for everything from groceries to clothes to dining out, rose 5.4% in July from a year prior, according to the Labor Department. This is the same pace as June’s annual increase, which was the biggest year-over-year gain since 2008.

On a monthly basis, price pressure appears to be slowing. CPI climbed by a seasonally adjusted 0.5% in July, down significantly from the 0.9% increase seen between May and June.

The “core CPI,” which excludes volatile components like food and energy, slowed even more, increasing 4.3% from a year prior, down from June’s 4.5% annual increase. Month to month, the core CPI rose just 0.3%, down significantly from the 0.9% monthly increase seen in June.

While this represents a significant slowing in inflationary pressure, it remains elevated. Between 2000 and 2019, monthly CPI gains averaged 0.2%. It also remains to be seen whether this is the start of an ongoing trend of cooling price pressure, or merely a temporary disruption caused by the resurgence of the nation’s coronavirus cases and increasing hesitancy of consumers to engage in activities like travel and dining out.

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