The consumer price index showed modest inflation in July after a spike in May driven largely by higher energy costs.
The July consumer price index showed prices increased 0.1% for the month. Over the 12-month period ending in July, consumer prices rose 3.4%, down from 4.2% in the year ending in May. June had shown prices had dropped 0.4%, also largely due to falling energy costs.
Energy prices fell for a second straight month in July, dropping 1.5%. But that decline did little to offset a 15.7% increase in energy costs over the past year.
Despite the decline in the annual rate, inflation remains well above the Federal Reserve’s 2% target.
Energy costs have dropped over the past two months after the Trump administration brokered a ceasefire between Israel and Iran that temporarily halted fighting. But renewed conflict in the region has disrupted movement through the Strait of Hormuz, a critical global shipping route for energy markets, contributing to higher energy costs.
Nationally, the average price of a gallon of gas was 16 cents higher than a month ago, according to AAA.
The consumer price index measures the cost of goods and services based on their relative importance, with food, shelter and energy carrying greater weight.
Beyond energy, food costs also remain above the Fed’s 2% target. Over the past year, Americans have spent 3% more on food, while shelter costs rose 3.2%.
The annual inflation rate has roughly kept pace with increases in average weekly wages over the past year, according to Bureau of Labor Statistics data. Real wages are down just 0.1% over the last year, meaning Americans' buying power is ever slightly lower than a year ago.
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