Senator John Thune keeps crying about inflation. Today’s inflation report may dry those tears—inflation slowed in July, signaling price increases have peaked:
U.S. consumer prices increases slowed in July even as they remained at a 13-year high on an annual basis, but there were tentative signs inflation has peaked as supply-chain disruptions work their way through the economy.
The consumer price index increased 0.5% last month after climbing 0.9% in June, the Labor Department said on Wednesday. In the 12 months through July, the CPI advanced 5.4%. The drop in the month-to-month inflation rate was the largest in 15 months.
Excluding the volatile food and energy components, the CPI rose 0.3% after increasing 0.9% in June. That was the smallest gain in 4 months and the first deceleration in the so-called core CPI since February.
The core CPI rose 4.3% on a year-on-year basis after advancing 4.5% in June. Annual inflation rates have been lifted by the fading out of last spring’s weak readings from the CPI calculation but those so-called base effects are leveling off [Lindsay Dunsmuir, “U.S. Consumer Price Increases Slow in July, Signs Inflation Peaked,” Reuters, 2021.08.11].
“We believe June marked the peak in the annual rate of inflation,” said Kathy Bostjancic, an economist at Oxford Economics. “That said, price increases stemming from the reopening of the economy and ongoing supply chain bottlenecks will keep the rate of inflation elevated” [Christopher Rugaber, “U.S. Consumer Prices Rose in July But at Slower Pace,” AP via PBS NewsHour, 2021.08.11].
Wall Street investors are taking the down-bending inflation curve as a sign that Fed Chairman Jerome Powell has been right to treat the current inflation as transitory:
…”Inflation looks to be as ‘transitory’ as the FOMC have been telling us that it will be … and inflationary forces should continue to ease from here on for the remainder of the year,” said Michael Brown, senior analyst at Caxton, London [Devik Jain and Ambar Warrick, “Wall St Set to Rise as Inflation Growth Slows,” Reuters, 2021.08.11].
…and rather than baling at the new spending Senator Thune has been fighting, investors are digging passage of the big infrastructure dig:
The blue-chip Dow (.DJI) and the benchmark S&P 500 (.SPX) logged record closing highs on Tuesday, as economically sensitive stocks gained with the U.S. Senate’s passage of a $1 trillion bipartisan infrastructure package.
…Equipment manufacturers Caterpillar Inc (CAT.N) and Deere & Co (DE.N), construction materials supplier Vulcan Materials Co (VMC.N) and steelmaker Nucor Corp (NUE.N) rose between 0.5% and 2.9% in premarket trading, adding to sharp gains in the previous session on hopes of reaping gains from infrastructure projects [Jain and Warrick, 2021.08.11].
Poor John just can’t get the economy right. But, like Kristi Noem, John Thune gets elected for looks, not comprehension.