Gas station prices are seen in Bethesda, Maryland on August 11, 2022.
Mandel Ngan | AFP | Getty Images
There was more good news on inflation on Friday, as import prices fell more than expected, bringing much-needed relief to consumers.
the report ended a relatively upbeat week for those worried about rising prices, with “relatively” being the operative word, as the US is on pace to import just over $4 trillion of goods and services this year year, according to the latest Economic Office. Analysis data.
With Americans already paying huge bills for food, energy and many other items in their daily lives, any respite is welcome. After all, the 1.4% monthly drop in import prices was only the first this year, and the year-on-year increase is still more than 8.8%.
This news followed reports earlier in the week that both wholesale and retail price increases eased for the month. Producer prices declined by 0.5% and consumer prices, including food and fuel, were flat, both figures largely due to a sharp decline in most of the energy complex.
People are taking notice: A New York Federal Reserve survey released Monday showed consumers expect inflation to remain high, but not as much as in previous months. On Friday, the University of Michigan consumer sentiment survey, whose ups and downs tend to go hand in hand with pump prices, came in higher than expected, though it still came in to record low levels in June.
“This is just a report”
Taken together, the numbers are cause for at least some optimism. But it’s probably wise to put exuberance on hold.
The consumer price index remains 8.5% more than a year ago, while the producer price index has increased by 9.8% during the same period.
Krishna Guha, who heads global policy and central bank strategy at Evercore ISI, warned in a client note on the CPI that, “while the report is consistent with the view that pressures Inflationists may have finally peaked, this is just one report.”
Similar comments came Friday from Richmond Federal Reserve President Thomas Barkin. The central bank official told CNBC that the inflation news was “very welcome” but added that he saw no reason to pull back interest rate hikes that some economists fear will drag the US into recession.
“There is a long way to go before the Fed feels it has enough convincing evidence that inflation is moderating to stop raising rates,” Guha added.
The Fed and investors will take a look next week at the impact inflation has had on spending.
View from the consumer
According to FactSet, Wednesday’s advance report from the Commerce Department is expected to show a modest 0.2% increase in July retail sales after a 1% increase in June. The report is not adjusted for inflation.
However, there is a wide range of opinions on where the numbers could go.
Citigroup said its credit card data showed a potential decline of 1.1% for the month, while Bank of America said it sees a 0.2% decline, although spending in control group, excluding a variety of volatile categories, may have increased by 0.9%.
Fed officials will be watching closely for larger trends in how inflation affects Main Street.
“There seems to be a temporary peak in inflation,” said Joseph Brusuelas, chief economist at RSM.
However, he said this week’s numbers were likely to do little to influence the Fed’s intention to hold inflation back to the central bank’s 2% target.
“I think July inflation does nothing to alter the Fed’s policy path, and any idea that a Fed pivot is in the offing should be dismissed,” he said. “We are months away from any possible clear and convincing evidence that inflation is well on its way back to the 2% target that currently defines price stability.”