Inflation rose by an annual rate of 3.2% in July, reflecting the first increase after a year of cooling prices.
The Consumer Price Index, a basket of goods and services typically purchased by consumers, grew at an annual rate just below economists’ forecast of 3.3%, according to FactSet. On a monthly basis, inflation rose 0.2%, the Labor Department said Thursday.
The uptick, the first increase in the pace of growth since June 2022, is due partly to higher housing and food costs. Even so, economists said underlying press pressures are easing, and that the economy is showing signs that price increases will continue cooling.
“Overall, the underlying details of the July CPI inflation data are consistent with ongoing progress on disinflation,” said Gurpreet Gill, global fixed income macro strategist at Goldman Sachs Asset Management. “Although core services inflation trended higher on the month, other component-level trend are evolving in line with our expectations.”
Gill added, “In particular, rents and used car prices softened, alongside clothing and airfares.”
Excluding volatile fuel and food costs, the so-called core CPI for July rose 4.7% on an annual basis.
Housing costs, airline fares
The shelter index accounted for 90% of the total increase after rising 7.7% on an annual basis. Rising motor vehicle insurance costs, which jumped 2% after rising 1.7% in June, also contributed, according to the Labor Department. The recreation, new vehicles and household furnishings and operations indexes also rose.
Vehicle insurance providers have hiked prices as they face higher repair and replacement costs, according to OANDA senior market analyst Ed Moya.
Meanwhile, some types of services and products saw price declines, including airline fares, which fell 8.1% on a monthly basis. That represented the fourth straight month of declines for airfares.
While inflation rose slightly last month, “it’s nothing that will derail this past year of steadily declining prices,” Moya told CBS MoneyWatch prior to the inflation report’s release. “There is a lot of optimism that we’re going to see that disinflation process remain intact.”