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Inflation Sees First Monthly Decline in More than Four Years
July 15, 2024
U.S. consumers got a bit of relief this month as the inflation rate dipped for the first time since the pandemic, further clearing the way for the Federal Reserve to start cutting interest rates later this year.
The Consumer Price Index (CPI), a broad measure of the prices of goods and services across the economy, posted a monthly decline of 0.1% from the month prior, according to the Bureau of Labor Statistics. Falling gas prices and a sizable drop in vehicle prices helped push the first month-to-month decline that the index has seen since May 2020.
On an annual basis, CPI inflation slowed to 3% last month, down from 3.3% the month prior, for the lowest reading since June 2023.
The so-called “core” CPI, which excludes volatile components like food and energy, posted a monthly increase of 0.1% on a monthly basis and 3.3% on an annual basis. The core reading, which economists view as a better indicator of inflationary pressures, came in lower than Wall Street had expected, forecasting increases of 0.2% and 3.4%, respectively. The annual increase for the core rate was the lowest since April 2021.
Inflationary pressures were held in check by falling gasoline prices, which were down 3.8% for the month. That was enough to offset 0.2% increases in food and shelter. Housing-related costs have been a thorn in the side of Fed policymakers, who expected shelter inflation to slow more dramatically than it has. The component for housing accounts for roughly one-third of the CPI weighting, so stubbornly persistent housing inflation has helped keep inflation elevated. Still, the 0.2% increase represents a slowdown in the rate of increases, and will likely come as welcome news to the Fed.
A separate report from the BLS showed that the month’s tepid inflation helped wages. Real (meaning adjusted for inflation) wages posted a healthy increase of 0.4% for the month. While this is welcome news for workers, real wages are up just 0.8% from a year prior.
