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Mixed Signals: Consumer Prices Fall, While Producer Prices Grow
The National Association of Manufacturers (NAM) Monday Economic Re- port indicates mixed signals as consumer prices decline while producer prices rise. Avrio Institute President Dr. Shawn DuBravac, who wrote the report, outlines these key points: Inflation is falling: The Consumer Price Index declined 0.1 percent in June, the first decline in consumer prices since the pandemic. The decline was driven in part by a 3.8 percent fall in gasoline prices, which followed a 3.6 percent decline in May. Excluding food and energy, core CPI rose 0.1 percent in June after a 0.2 percent increase in May. Yes, but: Looking further up the supply chain, inflation pressures remain prevalent. The Producer Price Index for final demand rose 0.2 percent, exceeding an anticipated 0.1 percent gain. The year-over-year trend accelerated from 2.4 percent in May to 2.6 percent in June, sur- passing the expected 2.3 percent growth. The Fed is waiting for greater data consistency: After last week’s CPI figures were released, many market observers believed the positive
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news could encourage the Federal Reserve to cut rates, perhaps even sooner than the first anticipated cut in September. However, the PPI re- lease likely shifts the Fed in the opposite direction, prompting them to wait for clear evidence that inflation is contained and moving toward its 2 percent target. Yes, but: Last week, Fed Chair Jerome Powell testified on Capitol Hill and noted, “You don’t want to wait until inflation gets all the way down to 2 percent. If you waited that long, you probably waited too long because inflation will be moving downward and would go well below 2 percent, which we don’t want.” Chair Powell also noted, “If we see that the labor market were weakening unexpectedly, which is to say more than what we’ve seen in a material way unexpectedly, then we could also respond to that, because we have a dual mandate, and we now see the two man- dates more in balance than they were a year ago.” Meanwhile, the Consumer Price Index (CPI) declined 0.1 percent in June, following no change in May. This is the first time prices have fallen since the pandemic. Over the past 12 months, prices are up 3 percent. Gasoline prices dropped 3.8 percent in June, following a 3.6 percent decline in May, offsetting increases in shelter costs. The energy index fell CONTINUED ON PAGE 16
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July 22, 2024
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