July CPI Inflation Report Reveals Better-Than-Expected Readings As Inflation Eased

Published on

The July CPI inflation report is out, and investors are pleased, sending Dow Jones futures higher as a result. The consumer price index for July revealed an 8.5% increase in prices compared to June 2021, compared to last month’s 9.1% year-over-year increase that marked a 40-year high.

On a month-over-month basis, prices were unchanged after rising 1.3% month over month in June. The consensus among economists reporting to Dow Jones suggested a July CPI inflation report of 8.7% year over year and a monthly increase of 0.2%.

Get Our Activist Investing Case Study!

Get The Full Activist Investing Study In PDF

Q2 2022 hedge fund letters, conferences and more


The July CPI Inflation Report Is In

According to the Bureau of Labor Statistics, the July CPI inflation report revealed that gas prices declined, but food prices and rent continued to climb. Core inflation for July, which excludes food and energy prices, rose 0.3% in July after an increase of 0.7% in June. The July core inflation reading kept the annual increase at 5.9% following three consecutive monthly declines.

While gas prices had led this year's skyrocketing inflation, they are finally falling amid concerns that a global recession will slash demand. Gas prices are down 7.7% month over month but remain 44% higher on an annual basis. The price for a gallon of regular unleaded gas stood at an average of $4.03 on Tuesday, declining from $4.70 last month at this time.

However, grocer prices increased 1.1% month over month, pushing their increase over the last 12 months to 10.9%. The prices of key commodities like corn, wheat and other commodities have been falling due to the widespread recession worries. However, it might take a while before consumers start to see those falling prices on their grocery bills.

Futures Pop In Early Trading

Following the release of the July CPI inflation report, Dow futures surged 400 points as investors reacted to the better-than-expected numbers. Futures for the Dow Jones Industrial Average rose 1.3%, which amounted to 411 points, while futures for the S&P 500 increased 1.7%. Futures for the Nasdaq 100 surged 2.4%.

The Federal Reserve's next meeting won't happen until September, and it will consider the July CPI inflation report and other critical economic data before that meeting. The central bank is expected to raise interest rates again.

Nancy Davis of Quadratic Capital Management told CNBC that if the monthly inflation reports start to show a steady decline, the Fed could slow its pace of monetary tightening. This morning's increases in futures cam after the Nasdaq Composite recorded a third consecutive day of declines. The index led the declines in all the major U.S. indices, with the S&P 500 down 0.42% and the Dow Jones Industrial Average falling 0.18%.