ATFX - Inflation Cools But Prices Remain High! Is US Inflation Still Unresolved?

atfxThe official website - "Americans are scared of inflation!" Although inflation is cooling, Americans are still troubled by high prices. Will the CPI, which will be released on Thursday, end this trouble?

Foreign media said that while people are saying that inflation in the United States is cooling, it doesn't really feel like anything is getting cheaper. That isBecause most things really haven't been reduced in price.

Inflation is expressed in terms of the rate of change, andSo-called "disinflation" actually refers to the fact that prices are actually increasing at a slower rateBut for the average American, their experience is that everything is more expensive than before, and that's not going to changeUnless there is outright deflation。

While the Consumer Price Index (CPI) reflects headline inflation, the Bureau of Labor Statistics also publishes a separate report on average price data that reflects the prices Americans actually pay. It mainly covers only food and beverage categories, while the CPI shows inflation rates for various goods and services across the economy.

Here are the average price per pound of some foods before the epidemic and now:

According to the Bureau of Labor Statistics,The average price of basic foods like ground beef and potato chips is now a few dollars higher than it was before the epidemic. Gasoline prices are rising again, and the cost of electricity and various other daily necessities remains high.

The latest CPI data, due on Thursday, is expected to show a 3.3% year-on-year increase in July, up slightly from the previous month but still close to the lowest level in two years.Last June, U.S. inflation peaked at 9.1 percent, the highest level in 40 years.

According to the CPI report, food prices have declined in three of the past four months, butAfter two consecutive years of increases, this is hardly enough to make an impactHousehold food costs have risen by more than 23 per cent since the epidemic began in February 2020

The problem is that wages have barely kept up. Income growth has only just begun to outpace inflation in recent months, but not before.Americans have actually experienced two years of declining purchasing power.

"I'm one of those people who complain as soon as they get to the grocery store that everything is too expensive," said Jennifer Lee, senior economist at BMO Capital Markets. "You're willing to pay just because you have to eat”。

This largely explains why Americans are rather pessimistic about their financial situation, which weighs on confidence indicatorsThe University of Michigan's consumer confidence index hit a record low of half that level in February 2020 when inflation peaked in June 2022. It has since recovered to 71.6, but remains well below its long-term average.

Inflation has also been a major unresolved issue during Biden's tenure.Mr. Biden's approval rating has been below 50 per cent for the past two years since price pressures intensified, according to Gallup, and while his economic policies may help the US avoid recession, the budget deficit is ballooning.

“American voters are still spooked by inflation."Bidenomics doesn't work at all," Greg Valliere, chief U.S. policy strategist at AGF Investments, said on Monday.

Nor can the easing of inflation offset the sacrifices Americans are making to adjust to the higher cost of living. They have largely come to rely more on credit cards,As savings dwindle, delinquency rates are rising.

Of course,Without a strong labor market, this pain would be even worseFortunately, employers are still adding jobs at a steady pace, keeping unemployment near its lowest level in decades, giving consumers the ability to keep spending