New Reports: Wholesale Prices Decline & Retail Inflation Drops to Zero in July as Gas Prices Tumble
According to three new reports this week, inflation at the wholesale and retail levels both declined in July as gas prices tumbled and retailers cut prices to move backlogged inventory.
Axios: "Consumer prices were unchanged in July [compared to June], as plunging prices for gasoline dragged the Consumer Price Index [CPI] down to zero. Core inflation, which excludes energy and food, rose only 0.3%, below what analysts expected."
The July figures lowered the annual rate of inflation from 9.1% to 8.6%.
In a separate report, the Labor Department’s Producer Price Index [PPI] showed that wholesale prices dropped 0.5% in July and that demand for goods dropped 1.8% from June to July as demand for services increased by only 0.1%.
Axios: Inflation was pulled down principally by a 7.7% drop in gasoline prices, which have continued to fall so far in August. Other sources of relief included airfare (down 7.8% in July, partly reflecting lower jet fuel prices) and rental car prices (down 9.5%).
There was more good news regarding inflation this week as the price for a wide variety of consumer goods purchased online also fell.
CBS: Online prices began to ease in July — the first dip in two years — falling 1% from a year ago, new data from Adobe Analytics shows. The biggest drops were for electronics, apparel and toys, while prices for jewelry, books, computers and sporting goods also declined.
"Because we're seeing prices on major online categories like electronics and apparel start to come down, we're seeing overall online inflation come down," said Adobe Digital Insights manager Vivek Pandya."
The supply chain problem that made it difficult for retailers to keep up with demand has now abated, and consumers have reduced spending, as a result of higher prices and recent Federal Reserve interest rate increases.
CBS, Vivek Pandya: "Softer consumer demand and robust inventory are helping power the decrease in prices on discretionary items like electronics and clothing."
"On the one hand, it's a situation where [online retailers] have amassed excess inventory because the demand level they were seeing in previous years like 2020 and 2021 has come down, so there has been a surplus across those categories."
To be clear; no one is willing to say that inflation is defeated, but these three reports suggest that the supply of most goods and services has now caught up to demand so businesses will have a harder time increasing prices in the future. There are still exceptions, of course. Food prices rose 1.1% in July, driven by such things as the acute labor shortage in agriculture and the war in Ukraine.
By: Don Lam & Curated Content