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More good news for the US economy and Bidenomics: Inflation continues to cool [1]

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Date: 2023-08-10  

The Bureau of Labor Statistics report for July indicated that US inflation has continued to cool down. The headline Consumer Price Index (CPI) increased by +0.2% in July and +3.2% on a year over year basis. Though the July numbers were slightly higher than in June, they came in below economists’ expectation of a +3.3% year over year increase — plus the CPI was far below the +8.5% year over year rate for July 2022. For July 2023, increases in shelter costs were offset by only slight increases in food and and energy as well as declines in health care services and automobile prices.

This was very good news in several respects: (1) the economy is experiencing the “soft landing” hoped for by the Fed, which suggests than further Fed rate hikes will be unlikely in the coming months; (2) real hourly (inflation adjusted) pay continues to increase on a monthly basis — the July 2023 year over year real wage increase of +1.1% is in stark contrast to the -2.7% decline from a year earlier; and (3) it is also contradicts the “Phillips Curve” concept that a lower unemployment rate is associated with higher inflation.

The tie-in of the stronger economy to Bidenomics will likely be a slow process, as the Inflation Reduction Act and other initiatives will require time to take hold in terms of increased productivity and new job opportunities. However, time may also be an ally as specific projects take hold and the economy moves further away from the period of Covid-driven inflation and market instability.

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[1] Url: https://www.dailykos.com/stories/2023/8/10/2186441/-More-good-news-for-the-US-economy-and-Bidenomics-Inflation-continues-to-cool

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