US consumer prices rose 3.2% for the 12 months ending in July, according to the latest Consumer Price Index, which landed Thursday. That compares to 3% in June.
It's the first month in a year's span that the annual inflation rate accelerated.
But don't slam that panic button just yet.
"Don't be fooled by the uptick in [year-over-year] inflation," noted Julia Pollak, chief economist for ZipRecruiter. "Inflation is slowing and doing so across a broader range of goods and services."
Economic data always comes with its fair share of caveats. Typically, those include how monthly rates and individual components — such as gas, food and shelter — can be volatile. But economists are digging into the data to see how it all breaks down.
If prices rose over the course of a year like they have for the past three months, inflation would be more like 2%, Joe Brusuelas, principal and chief economist for RSM US, told CNN.
Those numbers are getting a lot closer to where the Federal Reserve wants to see inflation. The US central bank looks to the core Personal Consumption Expenditures index for its 2% inflation target. In June, core PCE rose 4.2% annually, according to Commerce Department data.
The Fed has a ways to go, but Thursday's CPI report showed that price increases are slowing down. Core CPI — which strips out volatile food and energy prices — rose 0.2% for the month, bringing the annual rate to 4.7%, a notch below June's 4.8%.
"Going forward, I really think you're going to see relief, vis-à-vis the core estimate of inflation, around rents, new vehicles and used vehicles," Brusuelas said.
Gimme (cheaper) shelter: Shelter (i.e. rent) is still playing an outsized role — to say the least — in inflation. In July, shelter costs contributed 90% to the 0.2% monthly uptick.
That could change in the coming months in the most dramatic of fashions, my colleague Anna Bahney reported.
Forecasts from San Francisco Fed researchers suggest we could see the most severe contraction in shelter inflation since the global financial crisis of 2007 to 2009.
"Our baseline forecast suggests that year-over-year shelter inflation will continue to slow through late 2024 and may even turn negative by mid-2024," the researchers wrote. "This would represent a sharp turnaround in shelter inflation, with important implications for the behavior of overall inflation."
The researchers' models cast a fairly wide range for possible movement, with year-over-year shelter inflation in late 2024 estimated at anywhere from negative 9% to positive 2% in the baseline model. Even that upper-end increase would represent a slowing of inflation.
Monthly shelter costs were up 0.4% in July from June and up 7.7% from a year ago. After steadily increasing, year-over-year shelter inflation has moved down for four consecutive months, from 8.2% in March to 7.7% in July.
Where's the beef? Rising beef prices helped to drive food-at-home inflation 0.3% higher in July, my colleague Danielle Wiener-Bronner reported.
From June to July, adjusted for seasonal swings, the price of uncooked beef roasts spiked 6.5%. Uncooked beef steak prices rose 2.3% and uncooked ground beef rose 1.5%. Altogether, beef and veal got 2.4% more expensive last month.
The higher prices were recorded as the country's beef supplies have been contracting. Extreme drought in recent years caused farmers to rapidly sell cattle because the conditions, plus higher feed costs, made it expensive or impossible to maintain herds. That wave of sales, particularly of cows used to breed, led to supply constraints this year.
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