This was a good week for inflation numbers, but whether it can last is the big question.

Gas station prices are seen in Bethesda, Maryland on August 11, 2022.

Mandel Ngan | AFP | fake images

There was more good news on Friday for inflation as import prices fell more than expected bringing much needed relief to consumers.

The report capped off a relatively bullish week for those worried about rising prices, and “relatively” is the operative word, as US analytics data.

With Americans already paying huge bills for food, energy, and a host of other items in their daily lives, any reprieve is welcome. After all, the monthly import price drop of 1.4% was only the first this year, and the year-on-year increase is still above 8.8%.

That news followed reports earlier in the week that both Wholesale and retail price increases decreased for the month Producer prices fell 0.5% and consumer prices, including food and fuel, were flat, both figures due in large part to a sharp drop in most of the energy complex.

People are taking notice: a New York Fed poll published on monday showed that consumers expect inflation to remain high, but not as high as in previous months. On Friday, the University of Michigan consumer confidence survey, whose ups and downs tend to go hand in hand with gas station prices, came in higher than expected, though still below record lows reached in June. .

‘This is just a report’

Taken together, the numbers are cause for at least a little optimism. But it’s probably wise to put the exuberance on hold.

The consumer price index remains 8.5% more than a year agowhile the Producer Price Index has increased by 9.8% over the same period.

Krishna Guha, who heads global policy and central bank strategy for Evercore ISI, warned in a note to clients on the CPI that “while the report is consistent with the notion that inflationary pressures may finally have reached their peak.” Max, this is just a report.”

Similar comments came Friday from Richmond Fed President Thomas Barkin. the central bank official told CNBC that the news of inflation was “very welcome” but added that he saw no reason to withdraw interest rate increases that some economists fear will drag the US into recession.

“There is a long way to go before the Fed feels they have enough convincing evidence that inflation is moderating to stop raising rates,” Guha added.

The Fed and investors will see next week how much of an impact inflation has had on spending.

View from the consumer

Wednesday’s advance report from the Commerce Department is expected to show a modest 0.2% overall gain for July in retail sales after a 1% rise in June, according to FactSet. The report is not adjusted for inflation.

However, there is a wide range of opinion on where the numbers could land.

Citigroup said its credit card data shows a potential 1.1% drop for the month, while Bank of America said it sees a 0.2% decline, though control group spending, excluding a variety of volatile categories, may have increased by 0.9%.

Fed officials will be watching closely for broader trends in how inflation is affecting Main Street.

“It looks like a tentative spike in inflation is underway,” said Joseph Brusuelas, chief economist at RSM.

However, he said this week’s figures were likely to do little to influence the Fed’s intention to reduce inflation to the central bank’s 2% target.

“I think July’s inflation does nothing to alter the course of Fed policy, and any notion that a Fed pivot is at hand needs to be ruled out,” he said. “We are a few months away from any potential clear and convincing evidence that inflation is on its way back to the 2% target that currently defines price stability.”

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