According to the latest report of the Consumer Price Index of All Urban Consumers (CPI-U), inflation remains down by two-thirds from its mid-2022 peak. The CPI-U increased by 0.2% on a seasonally unadjusted basis in July 2023, according to the Bureau of Labor Statistics report published July 12. Year-over-year, before seasonal adjustment the all-items index grew by 3.2%, constituting a marked acceleration in the CPI-U from June’s 3.0% reading.
July’s better-than-expected headline CPI reading, while higher than the previous month by 0.2 percentage points, is lower than the 3.3% reading that most economic analysts expected heading into Thursday’s report.
Soft inflation data caused an immediate positive reaction in the markets, with the Dow Jones Industrial Average popping up +0.73% by mid-morning Thursday, constituting a 200-point gain. In general, inflation rates in the U.S. are continuing to decelerate, indicating that the Federal Reserve’s hawkish interest rate policy is working as intended—with the most recent 0.25 basis point increase having been announced only two weeks ago, during the July 26 Federal Open Market Committee press conference.
While many line items in the July 2023 CPI report suggest that prices are not increasing, especially concerning energy and utility prices, there is ample evidence that housing and lodging costs are the main drivers of inflation in America. All in all, July’s 2023 CPI numbers remain well over 50% higher than the Fed’s target inflation rate of 2%—a target that may prove unobtainable without further rate hikes from the central bank.
Source: Bureau of Labor Statistics
July’s monthly CPI figure matched the previous month (0.2) while outpacing May’s reading (0.1). However, May’s unusually low month-over-month CPI reading was an anomaly largely attributable to the base-year effect seen between April 2021 and 2022 due to the Russian invasion of Ukraine, an event that saw immediate and large-scale price increases in oil, gas, and certain natural resources. These prices then partially settled in the subsequent months.
As depicted in the table above, the June 2023 CPI figure was largely driven by increases in transportation (9.0), shelter (7.7), and food away from home (7.1). Downward pressure on the CPI was exerted by rapidly decreasing costs of fuel oil (-26.5), energy commodities (-20.3), and gasoline (-19.9).
Food Prices
The food index rose 0.2 percent in June after rising only 0.1 percent in June and increasing 0.1 percent in May, representing a core market segment where consumer prices rose compared to the month prior. Notably, the beef index rose 2.4 percent while eggs, fish, and poultry rose by a more modest 0.5 percent. The same reading (0.5%) is true of milk and dairy products as well.
Year-over-year, the food away from home index rose 7.1 percent in July 2023, whereas the food at home index rose by 3.6 percent—nearly half the price acceleration seen in restaurants and cafes in America.
Energy Prices
The energy index rose in July (0.1%) after rising rapidly in June (0.6%). The natural gas index spiked 2.0 percent on the month after seeing five consecutive monthly decreases. The good news for American households is that the energy index fell (-12.5%) year-over-year in July and the gasoline indexed fared even better—dropping a remarkable 19.9 percent on a 12-month span. Other large-scale price decreases were seen in both the natural gas and fuel oil indices.
Core July 2023 CPI
Regarding the core CPI data for July 2023 (inflation less food and energy), the index rose 0.2% month-over-month in July, maintaining the same acceleration rate as June. Below is an itemized breakdown of the main price fluctuations seen within July’s core CPI reading:
- Shelter index: +0.4% (+0.4% in June)
- Motor vehicle insurance: +2.0% (+1.7% in June)
- Rent index: +0.4%
- Lodging away from home: (-0.3%)
- Airline fares index: (-8.1%)
- Used cars and trucks: (-1.3%; +4.4% in June)
- Medical care index: (-0.2%)
Source: Bureau of Labor Statistics
Seasonally Unadjusted CPI Data for July 2023
Before seasonal adjustments, the CPI-U for July 2023 increased (+3.2%) year-over-year and increased by 0.2 percent on the month, rising to an index level of 305.691. Since these figures are unadjusted, they include regular seasonal price fluctuations that generally occur by the same margins every year.
Now Is The Time to Protect Your Wealth
While the July Consumer Price Index report might appear positive, the U.S. dollar’s value is steadily declining day by day. The outcome? Countless American families now have reduced purchasing power compared to the previous month, making it increasingly difficult to manage their expenses. Though inflation is becoming more familiar, the average American household has actually seen its yearly wages decrease by around $7,400 due to inflation and interest rate increases since 2021.
The good news is that we can counteract the negative impacts of inflation. You might want to consider talking to your financial advisor about adding different types of assets to your investment portfolio. These alternative assets could potentially help safeguard your savings from the erosion of the U.S. dollar’s value.
Throughout various economic downturns and crises, such as the 2020 stock market crash and the 2008 global financial crisis, gold and silver have historically performed better than conventional securities. For many people, gold acts as a defense against inflation, providing a reliable store of value when traditional assets lose their worth. It’s no surprise that accomplished investors like Ray Dalio and Kevin O’Leary view it as a tool for managing risks.
Interested in starting to invest in gold or silver? You can begin by opening an account with one of the top-rated gold IRA service providers. While you’re at it, stay informed about inflation developments in the upcoming months. Our free CPI inflation calculator tool is available to help you monitor how inflation is impacting your household’s purchasing power. It effectively tracks the erosive effects of inflation, allowing you to stay in the know.
Liam Hunt, M.A., is a writer specializing in finance and international affairs. His articles have appeared in the Toronto Star, Ottawa Citizen, and Vancouver Sun, and his expert commentary has been featured in Forbes, Bloomerg, Barron's, and the New York Post.
