If inflation has been the biggest threat to the U.S. economy then July's data should show some relief.
The Bureau of Labor Statistics tracks items that affect the consumer price index. It was the first time since May 2020 that the aggregate measure hadn't posted a month-over-month increase.
Following a trend that helped send economic growth into contraction for the first half of the year, the consumer price index posted its fastest 12-month gain in almost 30 years.
The short-term trend shows that the rate of price increases is abating, which is good news for the economy.
Aneta Markowska said that the entire recession narrative needs to be put on a shelf. A reversal in inflation will support a stronger-for-longer narrative.
Markowska sees a 3% growth rate in the third quarter, which is in line with her predictions. The Atlanta Federal Reserve's GDPNow gauge, which tracks economic data in real time, pointed to a 2.5% growth rate in a Wednesday update.
Markowska thinks there will be a recession in the back part of the year.
There was at least one argument for both of them in the report.
The fall in energy prices was the main reason for the lower inflation rate. The biggest decline in gasoline since April 2020 happened in the month of April. The price of fuel oil plummeted as the price of energy fell.
The cost increases for transportation services came off the boil, with airline fares falling 7.8% to reverse a trend that has seen tickets increase by 27.7% over the past year.
There were no other signs of deflation in the report. The food index increased 1.1% on the month and is up 10.9% over the past year.
City Harvest, which helps feed needy New Yorkers who have been hit particularly hard by price surge, is worried about that.
Many more children are coming into the organization's food pantry. Even before the Pandemic hit, food security was not easy to find. People are turning to food pantry because of the rising prices.
The number of children seeking food assistance doubled after the Covid outbreak, and the organization is struggling to keep up.
She said that they are supported byGenerous New Yorkers.
Consumers have continued to spend even with inflation-adjusted wages falling over the past year.
Jonathan Silver, CEO of Affinity Solutions, which tracks consumer behavior through credit and debit card transactions, said spending is rising at a healthy pace.
He said that some categories are being impacted more by inflation than others. People are postponing their purchases.
Department store spending has fallen over the past year while discount store spending has increased. Spending at amusement parks is down, but theaters are up. Some of those numbers are influenced by rising prices, but they also reflect the amount of transactions.
Discretionary spending is expected to increase.
He said that there will be a spike later in the year that will create an upward slope to the spending in key categories. Some relief on food prices could be a holiday present for consumers.
The year-over-year inflation rate is 8.5%. Rick Rieder is the chief investment officer of global fixed income at asset management giant BlackRock.
Concerns that the Federal Reserve's interest rate hikes will slow the economy so much that it will fall into recession are at the center of worries about global growth.
Following Wednesday's report, traders shifted their bets to expecting the Fed to hike just half a percentage point in September, rather than the previous trend towards 0.75 percentage points.
He wrote that the persistence of still solid inflation data and last week's strong labor market data places Fed policymakers firmly on the path towards continuation of aggressive tightening.
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