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July Inflation Rate Rises 3.2%, First Increase After Year of Decreasing Prices

Inflation increased by 3.2% in July, marking the first rise in prices after a year of cooling. The Consumer Price Index, which measures the cost of goods and services typically purchased by consumers, grew slightly below the economists’ forecast of 3.3%. On a monthly basis, inflation increased by 0.2%, according to the Labor Department.

The July inflation rate was influenced by higher housing and food costs. However, economists believe that underlying price pressures are easing and the economy is showing signs of cooling price increases. Gurpreet Gill, a global fixed income macro strategist at Goldman Sachs Asset Management, stated that the details of the July CPI inflation data align with the ongoing progress in disinflation. Although core services inflation increased slightly, other components such as rents, used car prices, clothing, and airfares softened.

Excluding volatile fuel and food costs, the core Consumer Price Index for July rose by 4.7% on an annual basis. Housing costs, particularly the shelter index, accounted for 90% of the total increase, rising by 7.7% annually. Rising motor vehicle insurance costs and other indexes such as recreation, new vehicles, household furnishings, and operations also contributed to the overall increase. Vehicle insurance providers have increased prices due to higher repair and replacement costs.

Notably, some services and products experienced price declines, including airline fares, which fell by 8.1% on a monthly basis. This marks the fourth consecutive month of airfare declines.

Despite the slight increase in inflation last month, analysts believe that it will not derail the trend of steadily declining prices observed over the past year. The disinflation process is expected to remain intact.

Source: [financehubusa]

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