Quick Hit: 

According to the latest CPI report from the Bureau of Labor Statistics released Wednesday, U.S. inflation rose 2.9% in July year-over-year, with prices continuing to rise, having surged 20.3% since January 2021, when Joe Biden and Kamala Harris took office. 

Key Details:

• The CPI report shows a 2.9% year-over-year inflation increase in July, slightly below the 3% economists predicted. However, this lower inflation rate does not mean prices are decreasing; they continue to rise and have surged by 20.3% since January 2021.

• Prices for essential goods and services have seen significant spikes in that time, including gas (+50.5%), electricity (+31.7%), and groceries (+21.6%).

• Economist E.J. Antoni commenting on the report tweeted, “Common expenses for the average American family are up 25% or more since Jan '21; vehicle cost, maintenance, repair, and insurance are particularly bad - driving is now prohibitively expensive for many folks,” adding, “Consumer prices have never been higher, but I'm also curious what changed in Jan '21…?”

Diving Deeper:

The latest Consumer Price Index (CPI) report from the Bureau of Labor Statistics Wednesday shows U.S. inflation rose by 2.9% in July compared to a year earlier, slightly under the forecasted 3%. While the inflation rate slowed, it is critical to note that prices are still climbing. Since Joe Biden and Kamala Harris took office in January 2021, prices have surged by 20.3%, significantly impacting the cost of living for Americans.

E.J. Antoni, an economist, shed light on how these rising costs are hitting homeowners particularly hard, explaining that, “According to B(L)S, homes are 22.0% more expensive than in Jan '21, but they don't use real-world data on home prices and interest rates. Doing so reveals that the cost of homeownership has more than doubled, with the monthly mortgage payment on a median-priced home up 112% in that time.” 

In addition to housing, the rise in everyday expenses is undeniable. Gasoline prices have increased by 50.5%, electricity by 31.7%, and groceries by 21.6%, leaving American families struggling to manage their budgets. Other critical areas have also seen steep increases: fuel oil is up 49.1%, airfare by 22.6%, and hotel costs by 51.2%. These escalating costs are further compounded by increases in vehicle-related expenses, as Antoni notes, “Common expenses for the average American family are up 25% or more since Jan '21; vehicle cost, maintenance, repair, and insurance are particularly bad—driving is now prohibitively expensive for many folks.”

Antoni also draws attention to the erosion of purchasing power, noting, “Inflation outpacing earnings growth along with higher borrowing costs (from larger debt balances and higher interest rates) have combined to effectively reduce the typical American family's annual income by about $7,800 compared to Jan '21.” 

The CPI report further shows that core inflation—excluding volatile food and energy prices—rose 3.2% year-over-year and 0.2% from June. This indicates that while the headline inflation rate may be easing, the prices for everyday goods and services continue to climb, exacerbating the financial challenges facing American households.

Federal Reserve Chair Jerome Powell has suggested that the central bank may begin cutting interest rates in September if inflation continues to show signs of cooling. However, for many Americans, the prospect of lower borrowing costs offers little relief from the relentless rise in everyday expenses. As Antoni aptly summarizes, “Are you making more money? Yes. Does it get you more? No. Think of the difference between nominal and real pay as your hourly inflation tax—$5.71, on average.”