Energy prices helped stabilize inflation, but shelter picked up momentum last month.
Stabilizing energy prices helped cool off inflation pressures for the second straight month, new government data released on Aug. 12 show.
July’s U.S. annual inflation rate slowed to 3.4 percent, from 3.5 percent in the previous month, according to the Bureau of Labor Statistics’ Consumer Price Index report.
This was in line with economists’ expectations.
Crude oil and gasoline prices fell early last month amid optimism that the war in Iran would be winding down after both sides reached an earlier fragile ceasefire deal. The agreement eventually fell through, with Washington and Tehran accusing each other of violating the memorandum of understanding. They resumed fighting, sending energy prices higher after the Strait of Hormuz was disrupted again, impacting traffic in the narrow Gulf channel.
The sharp slide in oil markets was enough for the energy index to register back-to-back declines for the month, falling 1.5 percent in July. Due to the conflict in Iran, annual energy costs are up nearly 15 percent.
Gasoline fell almost 3 percent, while fuel oil decreased nearly 2 percent, the bureau said.
“Energy prices fell in July as investors had high hopes that the Middle East crisis would improve,” Jeffrey Roach, chief economist at LPL Financial, told The Epoch Times in an emailed note. “The decline in energy prices helped soften the inflation pressures of the month. Unfortunately, those high hopes were short-lived.”
Prices have reaccelerated this month. Brent crude futures rose 90 cents, or 1 percent, to $89.81 a barrel as of 3:57 a.m. ET on Aug. 12, while U.S. West Texas Intermediate crude climbed 88 cents, or 1.1 percent, to $84.08. Both benchmarks had earlier gained more than $1.
The national average for a gallon of gasoline remains above $4, according to the American Automobile Association.
On a monthly basis, consumer prices rose 0.1 percent, matching the market forecast.
The shelter index accounted for about two-thirds of July’s tepid increase, rising 3.2 percent year over year.
Shelter inflation has remained stubborn over the last few years, despite economists and monetary policymakers widely expecting it to cool sharply by now.
Food prices rose 0.1 percent. Supermarket costs slipped 0.1 percent, but food away from home advanced 0.3 percent.
Meat prices fell almost 1 percent, driven by a 0.8 percent decline in beef, a 1.5 percent drop in pork, and a 0.7 percent decrease in chicken. Eggs were little changed, but are down almost 26 percent year over year.
Underlying inflation remained tame, providing a modicum of relief for the Federal Reserve as it wrestles with the prospect of raising interest rates next month.
Excluding the volatile energy and food categories, the 12-month core inflation rate also eased to 2.5 percent, from 2.6 percent.
By Andrew Moran
