Inflation Ticked Up in July

Kathryn Mayer By Kathryn Mayer August 10, 2023

​Inflation inched up last month to show its first year-over-year acceleration in roughly a year, according to new figures out today, indicating that cost of living pressures are still weighing on most Americans.

The Consumer Price Index (CPI) for all items rose 3.2 percent for the 12 months ending in July, before seasonal adjustment, the U.S. Bureau of Labor Statistics (BLS) reported. That's just over the 3 percent year-over-year notch it reached in June, although still a significant improvement from when it peaked last summer at 9.1 percent.

On a monthly basis, the CPI rose 0.2 percent in July, seasonally adjusted, the same as in June.

The index for shelter was the largest contributor to the monthly increase, accounting for more than 90 percent of the rise, the BLS reported. The index for motor vehicle insurance also contributed to the hike. The food index grew 0.2 percent in July after rising 0.1 percent the previous month.

The latest CPI reading comes just days after data from the Federal Reserve Bank of New York found that credit card balances grew by $45 billion, roughly 4.6 percent, to land at a whopping $1.03 trillion.

Although inflation has eased significantly throughout the past year, the deceleration has not appeared to hit employees yet. Its persistent high rate over the past two years—coupled with high interest rates—has beset workers as they forked over higher prices for food, shelter, gas and other expenses. It also has impacted their retirement and emergency savings strategies.

A recent report from Transamerica Center for Retirement Studies found that more than one-third of workers (37 percent) have taken a loan, early withdrawal and/or hardship withdrawal from their 401(k) or similar plan or IRA to cover higher bills and other financial emergencies.

And Charles Schwab data out last week found that a significant 62 percent of workers see inflation as an obstacle to saving for a comfortable retirement, up from 45 percent last year.

"While the rate of inflation has started to come down, the compounding impacts of rising costs over time and still-high prices for many products continue to weigh on workers," said Marci Stewart, Director, communication consulting and participant education for Schwab Workplace Financial Services.

The Fed's target inflation rate is 2 percent.

Although wages have increased in response, salaries have largely trailed inflation.

Real average hourly earnings rose 1.1 percent, seasonally adjusted, from July 2022 to July 2023, the BLS reported separately today. The change in real average hourly earnings combined with a decrease of 0.9 percent in the average workweek resulted in a 0.2-percent increase in real average weekly earnings over this period.



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