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The U.S. month-to-month inflation rate fell from 0.9 percent in June to 0.5 percent in July, the U.S. labor department reported.
The core inflation rate, which ignores the always-volatile prices of food and fuel, was 0.3 percent for the month, compared to 0.9 percent in June, the department said, which gives a more accurate snapshot of inflation’s long-term trend.
Translated to an annual rate, July’s inflation pace was 5.4 percent above that of a year earlier.
A key reason inflation moderated: after zooming 10.7 percent in June, the price of used cars edged up just 0.2 percent in July. (See “Used Car Prices Skyrocket,” Trends Journal, 8 June, 2021.)
Those prices may be easing even more.
A price list from auction company Manheim, which tracks data ahead of the labor department, shows prices of used vehicles dropping 2.6 percent in July from June.
The rise in used-car prices may be easing, but it is unlikely to halt: the chip shortage that has slashed production of new cars probably will continue into next year, the Wall Street Journal reported, which will continue to buoy demand for second-hand vehicles.
Room rates at hotels and motels rose 6.8 percent in July from June and now stand 8.8 percent above rates a year previous.
The higher rates reflect not only the resumption of leisure travel, but also the lodging industry’s difficulty in recruiting and keeping staff, the WSJ noted.
TRENDPOST: A slowing inflation rate may be good news, but the bad news is that prices are still going up at a brisk pace—and will continue to, well into 2022 at least.
Although inflation may be slowing, this year’s price increases are unlikely to reverse: history shows that, once inflated, prices rarely come down except during deflationary cycles, which are a sign of economic distress.
And while an economic collapse will drive down prices, with governments pumping in tens of trillions to artificially prop them back up, currencies will decline in value, thus pushing up the cost of goods. Thus, it will be weak currency issues rather than the supply and demand issue that is currently driving prices higher.