Inflation is cooling. The consumer price index (i.e., inflation rate) registered at 3% for the month of June 2023. 

According to monthly data released by the Bureau of Labor Statistics, the prices of goods rose 0.2% from the month prior but 3% from a year prior marking the slowest increase in prices in two years.

Are Americans experiencing tangible financial relief? Yes and no. 

Let’s break down what this inflation report tells us. 

Here are five key takeaways from the July Inflation report:

  1. Housing inflation is rising rapidly. Inflation on shelter rose 7.8% from the previous year. Housing costs were the largest contributor to the inflation on all items, accounting for over 70% of the increase.
     
  2. Core inflation is still sticky. Inflation on items excluding food and energy–the most volatile categories–rose 4.8% over the year, down from a 5.3% yearly increase the previous month. Some of the “stickiness” in prices on other goods may be easing but is still present.
  1. Wages have finally caught up with inflation. Inflation-adjusted hourly weekly earnings increased 0.5% over the month and 0.6% over the year. For the first time in over two years, real wages rose faster than inflation, even if barely.
  2. Relief at the gas pump. Gasoline prices are down 16.7% from last year with a modest 0.6% over the previous month.
  3. Interest rate hikes are not off the table. The consumer price index remains above the Federal Reserve’s target rate of about 2%

What it means to me

Price increases may be cooling but Americans are under significant financial pressure. 

Nearly two out of three (61%) of Americans say price increases have caused their households financial hardship according to a recent Gallup poll. This is up 6 percentage points from November.

A steady 15% call these hardships “severe” and are affecting their ability to maintain their current standard of living. Just shy of half (46%) call the hardship moderate but say they don’t jeopardize their standard of living. Think about all of the times over the past two years that you’ve said to a random stranger at the supermarket “I can’t believe how expensive this is.”

There’s a good reason. We are paying much more for all goods and services than we did at the start of 2021. 

According to conservative congressional analysis, since President Biden took office…

  • Inflation has increased by 16.6%. 
  • Grocery (food at home) prices have increased by 20%. 
  • Dining out prices have increased by 18%. 
  • Energy prices have increased by 38%. 
  • Gasoline (all types) prices have increased by 52%.
  • Electricity prices have increased by 26%. 
  • Rental prices have increased by 15.6%.
  • Prices for used cars and trucks have increased by 35%.
  • Apparel prices have increased by 10.8%. 

Inflation from one year ago is cooling, but prices are still significantly higher than they were two years ago or since President Biden took office.

President Biden is touting Bidenomics, his economic agenda, for slowing price increases, but he should also credit Bidenomics with causing prices to spike soon after he took office.

Energy shocks due to Russia’s invasion of Ukraine and pandemic supply-chain disruptions worsened inflation, but the president’s signature $2 trillion American Rescue Plan recklessly injected massive amounts of cash into the economy to fuel demand when it could not be met by supply.

Families have been forced to cut back on spending, increase credit card usage, and exhaust their savings due to two years of high inflation. With housing prices continuing to rise, overall inflation cooling may not feel like much relief.