Is inflation finally on the decline in the US? It’s complicated

theguardian.com:

What goes up must come down. Right? Inflation has been soaring over the last year. But price rises in July were “just” 8.5% higher than what they were last July, down from a 9.1% yearly rate in June. Perhaps the worst is over?

Americans have been feeling the hit at the gas pump, grocery stores, restaurants and when planning vacations. In response, the Federal Reserve raised interest rates from near zero to between 2.25% and 2.5% as it tries to drive inflation down to its target rate of 2%, but it is unclear when that goal can be reached.

What is clear is that when and if prices do start to fall, it is going to take time, and in some sectors, a lot more time than in others. Nor is declining overall inflation a guarantee that prices will not rise in some areas again.

The energy sector, particularly gasoline prices, have played a huge role in soaring inflation rates. Compared to last year, energy prices were up 41% in June and gas prices alone were up 60%.

There are signs of relief, at least in the near future. The gasoline index fell 7.7% in July, the labor department reported on Wednesday. After peaking at $5 a gallon nationally in the beginning of summer, gas prices finally started to come down in June. Gas is now under $4 a gallon in over 19 states as demand has softened over the last few weeks.

“We’ve seen demand begin to come down as gas prices got so expensive earlier this summer,” said Sarah House, a managing director and senior economist at Wells Fargo. “It began to change behavior.”

Americans are using less gas this summer: gas consumption in the US is now over 1m barrels a day below levels that were seen in the summer of 2020, which was already lower than what was seen pre-pandemic, according to federal government