Q: July’s rate of inflation was 8.5%, down from 9.1%. That’s still really high. You have written that July’s inflation reports had a lot to celebrate. Can you explain?
A: 8.5% is backward looking – it’s what the inflation WAS over the past year. Unfortunately, the news media likes to emphasize the negative. Inflation’s Peak occurred in June.
Looking at the forward indicators, July appears to be the first of several months of good inflation news. As we have written and discussed in previous podcasts, we thought that June would be the peak in inflation for this business cycle, and, after the July inflation data, that looks to be the case. The CPI came out on Wednesday (August 10) flat (0%) on a M/M basis (consensus: +0.2%), bringing the Y/Y rate down to +8.5% (consensus: +8.7%). Core CPI (ex-food and energy) was +0.3% (consensus: +0.5%) with the Y/Y rate falling to +5.9% (consensus: +6.1%).
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