The numbers: The cost of many goods and services such as gas, cars, clothing and aircraft elevation rose in July in a rebound of pandemic lows, but inflation is still barely visible in the wake of a recession caused by coronavirus, which putting the demand too much into the whole economy.
The consumer price index rose 0.6% for the second month in a row, the government said Wednesday. Economists surveyed by MarketWatch saw a 0.4% increase.
The cost of living had decreased from March to May in the wake of the crisis.
The increase in consumer prices over the past 12 months has meanwhile increased to 1% from 0.6% in June.
Just seven months ago, at the beginning of 2020, the annual rate of inflation had risen to as high as 2.5%.
Another close measure of inflation that radiates food and energy also shot up 0.6% last month. The increase in the core rate was the largest since 1991, but it follows a record decline.
The annual increase of the so-called core percentage moved to 1.6% from 1.2%.
To read:Fed’s Barkin says that economic downturn could suffer without more stimulus from Washington
What happened: Higher gas prices accounted for about a quarter of the rise in consumer inflation in July. The cost of oil has returned to multi-year lows earlier in 2020, although prices are still relatively low.
Prices for rent, medical care, new and used cars, car insurance, passenger traffic, clothing, and wireless phone and internet service have also increased.
However, even after these recent increases, many companies lack the power to significantly increase them further. Far fewer people fly, go out to eat, reserve hotel rooms or buy clothes for the office, among others.
“In particular, it reflects a recovery in the prices of goods and services that were most affected in the early stages of the pandemic,” said Paul Ashworth, chief U.S. economist at Capital Economics.
The cost of food and recreation were among the few categories to show decline in prices. Food prices fell 0.4% after three major increases in a row.
To read:Wholesale prices increase 0.6%, but do not be fooled: Inflation does not pose a threat to the economy
To look: MarketWatch Economic Calendar
Large image: Inflation has increased relatively since the Great Depression of 2007-2009, and the coronavirus crisis is likely to continue to do so in the near future. Inflation is still well below the Federal Reserve’s target of 2%.
The government is pumping trillions of dollars worth into the economy, but only because demand was on the verge of collapsing. Inflation is famously described as too much money chasing too little goods. At present, there is simply not enough demand for goods and services in the US or abroad to fuel a sustained increase in prices.
To read:The economy took another hit of COVID-19 in July – just how bad was it?
What are they saying? “At this point, it seems that the recent upswing in inflation has been more about the retracement of the lows in March and April, rather than a telling sign of increasing price pressure,” said Jim Baird, chief investor at Plante Moran Financial Advisors.
Brand Response: The Dow Jones Industrial Average DJIA,
and S&P 500 SPX,
rose in trade Wednesday morning.
.
