Grocery prices in the United States continue to rise faster than policymakers would like. The consumer price index (CPI) increased to 3.4% year on year last month, just one-tenth of a percentage point lower than the previous month, according to data published on Wednesday by the Bureau of Labor Statistics (BLS), the agency responsible for compiling the figures.
Core inflation, which excludes more volatile items such as energy and food, rose 2.5% from a year earlier, down one-tenth of a percentage point from June. Energy prices have climbed 14.7% over the past 12 months, driven by the energy crisis triggered by the war in Iran. Even so, intermittent ceasefires in recent weeks have eased pressure on fuel markets, resulting in a modest 1.5% decline in energy prices over the past month.
Food prices have increased 3% over the past year, following a 0.1% rise in July, the seventh consecutive monthly increase this year. However, signs of moderation are beginning to emerge. “Three of the six major grocery store food group indexes decreased in July. The meats, poultry, fish, and eggs index decreased 0.7% over the month as the pork index declined 1.5%,” the statistical agency noted.
One notable exception was lettuce, which became 16.4% cheaper over the past month as a result of a Cyclospora outbreak, a parasite that causes severe diarrheal illness and has infected thousands of Americans across 15 states.
July’s inflation figures provide some relief from price pressures, but they leave Federal Reserve policymakers facing the same balancing act. On the one hand, inflation remains well above the Fed’s 2% target; on the other, the labor market is beginning to show signs of slowing, with the economy shedding 23,000 jobs in July. The Fed has opted to wait until September before making a decision on interest rates.
Fed Governor Kevin Warsh will have the opportunity to scrutinize July’s employment and inflation data at the annual gathering of central bankers in Jackson Hole at the end of August, a meeting that is shaping up to be crucial for understanding the future direction of Federal Reserve monetary policy.
“Today’s CPI print, alongside July’s drop in payrolls, should lower expectations for a September hike, but does not put it completely to bed,” Seema Shah, chief global strategist at Principal Asset Management, told Bloomberg.
On a monthly basis, prices rose 0.1% in July after falling 0.4% the previous month. The Labor Department’s statistical agency said the increase was largely driven by housing costs, which rose 0.1% last month and accounted ”for roughly two-thirds of the monthly all items increase.”
Food prices also rose 0.1% during the month, while dining out became 0.3% more expensive, suggesting that the price pressures stemming from the energy crisis are beginning to spread to other items in the household shopping basket.
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