Consumer prices rose 0.5 percent in July and 5.4 percent over the past 12 months, according to data released Wednesday by the Labor Department, but the monthly pace of price increases fell sharply.
The consumer price index (CPI), a closely watched gauge of inflation, rose at a much slower monthly pace than June’s torrid 0.9 percent increase. Even so, the 12-month increase in the CPI in July was even with June’s rise of 5.4 percent, the highest annual inflation rate since August 2008, as the reopening of U.S. economy ramped up demand for a wide range of products.
A sharp jump in travel, leisure and hospitality spending, dining out and other consumer activities recently made safer by COVID-19 vaccines drove another month of price growth, largely in line with economists' expectations.
The CPI for food rose 0.7 percent in July and 3.4 percent over the past 12 months, far higher than the 2.4 percent annual increase seen in June. Prices for food away from home rose 0.8 percent in July, reflecting the rush of demand and the impact of supply chain disruption on restaurants.
Energy prices also rose 1.6 percent in July, with gasoline prices rising 0.6 percent after a sharp 2.9 percent spike in June, and are now 39.1 percent higher than the same point a year ago. Gas prices typically increase over the summer because of a sharp increase in travel for leisure, but are also rebounding from deep lows reached in 2020.
The monthly pace of inflation without food and energy prices fell sharply from June, however. The CPI minus those more volatile goods rose 0.3 percent in July, a third of the 0.9 percent from the previous month. July brought steep declines in the monthly increase of prices for used automobiles and transportation services, which had drastically increased inflation earlier in the year.
The smaller one-month price increases may indicate that inflation is beginning to lose steam, which would be a welcome sign for President BidenJoe BidenCDC working to tighten testing requirement for international travelers On The Money — Powell pivots as inflation rises Overnight Energy & Environment — Presented by ExxonMobil — Manchin seeks 'adjustments' to spending plan MORE.
Republicans, eager to recapture Congress in 2022, have blamed Biden and the Democratic economic agenda for recently high inflation. Higher consumer prices have also dented voters' views on Biden's handling of the economy at a critical time for his $3.5 trillion infrastructure and social services push.
The Federal Reserve is also facing increase pressure, including from some top bank officials, to begin easing off the monetary stimulus pumped into the economy since March 2020. Fed Chairman Jerome Powell said last month that the bank will soon begin laying out a plan to reduce monthly bond purchases, but lawmakers in both parties and some reserve bank presidents have called for a quicker taper.
--Updated at 9:29 a.m.