Today’s Consumer Price Index report reflects growing optimism in the economy with gas prices well below June’s peak

The gasoline dragon has been killed. Inflation is returning to the cave as consumers cheer.

On Wednesday, the Bureau of Labor Statistics (BLS) released Most recent monthly consumer price index (CPI). Report, track prices on various consumer products, there was no net price growth last month.

At the same time, full-year inflation fell to 8.5% in July after hitting a four-decade high of 9.1% in June.

That drop was largely due to a sharp drop in gas prices, which have fallen 7.7% since June, offsetting smaller price gains in other sectors such as food and housing.

The last time inflation gave consumers something to be optimistic about was in May, when the CPI showed inflation fell to 8.3% in April after the previous high of 8.5% in April. 3. However, in the summer months that followed, a record increase in gasoline prices caused inflation figures to soar.

The July drop looks different, as further evidence suggests prices may indeed be correcting. In Monday, The New York Federal Reserve has released its Survey of Consumer Expectations, which measures consumers’ perceptions of the economy. This week’s report shows the biggest monthly drop in inflation concerns since the survey began in 2013.

Consumers expect inflation to slow to 6.2% next year, according to the survey, down from 6.8% in June. That drop makes tangible sense because inflation expectations are seen as tied to economic reality, with businesses raising prices in response to what they predict the economy will look like over time. next time.

Those expectations are likely a direct result of the sharp and steady drop in gas prices, which peaked in mid-June with the national average of $5.02 per gallon, according to AAA. Until they started to fall, those prices changed the nation’s economic mood, with consumers reminded of inflation every time they needed gas.

Today, the average gas price is $4.01 per gallon. What happened to bring it down so much?

An unpredictable market

Throughout this summer, gas prices have been a particularly sore spot for President Joe Biden, who has seen his approval ratings drop due to many polls shows Americans feel increasingly negative about the economy.

With gas prices attached to oil prices and dependent on supply issues related to the pandemic and geopolitical disruption, which are largely beyond his direct control. However, he still managed to keep the price in check.

In June, he sent a letter to oil company executivescriticized them for making record profits while not increasing output enough to satisfy demand.

“I understand that many factors contributed to the business decision to reduce refinery capacity, which occurred before I took office.” I wrote. “But at a time of war, higher-than-normal refinery margins that go directly into American homes are unacceptable.”

In July, he repeated that idea on Twitter: “My message to the companies that run gas stations and set prices at the pumps is simple: This is a time of war and global danger.”

In addition to public calls for oil companies to help lower prices, Biden also proposed the idea of ​​a three-month gas tax exemption. Vacations, which analysts don’t think will drop significantly, had no effect. However, several states have enacted their own laws, including Maryland, Georgia, and Connecticut.

At the same time, the White House coordinate the release of emergency federal oil reserves “To address significant global supply disruptions caused by Putin’s Ukraine war and help stabilize volatile energy costs for American homes,” according to a statement from the Department of Energy.

It remains unclear, however, how those efforts impacted July’s sharp drop in gasoline prices, and how much is due to falling crude oil price.

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