Americans received another closely watched inflation report Wednesday, and this one contained a little bit of relief alongside a reminder that prices are still rising.
The consumer price index increased 0.1 percent in July compared with June, according to the Department of Labor. Compared with July of last year, consumer prices were 3.4 percent higher.
Both figures matched expectations.
The monthly increase followed an unusually sharp 0.4 percent decline in June, when annual inflation stood at 3.5 percent. That means the year-over-year inflation rate ticked down by one-tenth of a percentage point in July.
Core inflation, which excludes the often-volatile food and energy categories, also moderated on an annual basis.
Core prices increased 0.2 percent for the month and 2.5 percent over the previous 12 months. In June, annual core inflation had been running at 2.6 percent.
Those numbers will be particularly important at the Federal Reserve, where officials have been trying to determine whether inflation is sufficiently contained or whether monetary policy needs to become tighter.
Financial markets reacted accordingly.
Before the report, fed funds futures indicated nearly a 50 percent probability of a Federal Reserve rate increase at its September meeting. After the inflation numbers arrived, those implied odds dropped to roughly 40 percent.
Digging into the report shows why.
Goods prices declined 0.2 percent in July, marking their second straight monthly decrease. Once food and beverages were removed, goods prices fell an even steeper 0.4 percent.
Durable goods were an exception, rising 0.3 percent after falling in May and remaining unchanged in June.
Services moved in the opposite direction, increasing 0.2 percent after being flat in June.
At the grocery store, consumers received modest relief. Grocery prices declined 0.1 percent during July.
Eating out became more expensive, however, with prices for restaurant meals and other food consumed away from home increasing 0.3 percent.
Housing remained one of the biggest contributors to inflation.
The shelter index rose 0.1 percent and accounted for approximately two-thirds of the increase in the overall monthly CPI, according to the government. Rents increased 0.1 percent, while owners’ equivalent rent — the government’s estimate of what homeowners would effectively pay to rent their own homes — increased 0.3 percent.
Homeowners’ and renters’ insurance prices declined 0.1 percent.
Remove shelter entirely, and the overall CPI was flat in July.
Another closely monitored category, sometimes called “supercore” services inflation because it excludes housing costs, increased 0.2 percent during the month.
Energy provided some of the most noticeable downward pressure.
The energy index dropped 1.5 percent, led by gasoline prices, which fell 2.9 percent. That came immediately after a 9.7 percent gasoline-price plunge in June.
Consumers buying medicine also saw significant declines.
Prescription drug prices fell 0.8 percent in July, their third consecutive monthly decrease. They have now declined in five of the past six months and haven’t registered a monthly increase at any point this year. Nonprescription medicines declined 0.3 percent.
Major appliances became substantially cheaper as well, dropping 1.9 percent during July and 4.1 percent over the past year. Furniture prices were unchanged.
Vehicle prices were comparatively quiet.
New-car prices were flat after falling 0.2 percent in June, while new trucks increased 0.1 percent. New-car prices are 0.5 percent higher than a year ago.
Used cars and trucks increased 0.4 percent for the month but remain 1.9 percent cheaper than a year earlier.
Motor-vehicle insurance, another painful expense for drivers in recent years, declined 0.3 percent after dropping 2 percent in June.
