Inflation is forcing Americans to spend $709 more per month on on a regular basis goods and services than they did just two years ago, according to the chief economist at Moody’s Analytics.
“The high inflation of the past 2+ years has done a number of economic damage,” Mark Zandi tweeted on Friday following the discharge of the Consumer Price Index — a closely-watched measure of inflation that tracks changes in the prices of on a regular basis goods and services.
The CPI rose moderately, to 3.2% in July versus a yr earlier.
“Due to the high inflation, the standard household spent $202 more in a July than they did a yr ago to buy the identical goods and services. They usually spent $709 more than they did 2 years ago,” Zandi added.
Zandi — who also co-founded Moody’s global economic evaluation service, Economy.com — said he sees relief ahead, predicting that inflation is “set to moderate further” because the Federal Reserve approaches its 2% inflation goal.
“Vehicle prices will decline more, so too will electricity prices, and the expansion in the price of housing will slow further. The largest worry is the jump in oil prices, which bears close watching,” he added within the thread posted to X, formerly referred to as Twitter.
Though gas prices hit an eight-month high late last month, energy unexpectedly rose a mere 0.1%, the newest CPI report showed.
Nonetheless, over the past month, US West Texas Intermediate and Brent crude futures climbed nearly 10%, to $82.83 and $86.39, respectively.
Zandi concluded his evaluation with: “The deeper I dig into last week’s inflation statistics, the more confident I’m that inflation shall be back to the Fed’s inflation goal by this time next yr. And this without more rate of interest hikes, a recession, and even much of a rise in unemployment.”
Fed officials have said that they’re also now not forecasting a recession, though the sentiment opposes that of rankings agency Fitch, which owngraded the US top-tier sovereign credit from AAA to AA+, citing the likelihood that the economy will slip into a gentle recession later this yr.
Consumers, nevertheless, have continued to feel reprieve from the central bank’s aggressive tightening regime, with core CPI — which excludes volatile food and energy prices — only rising 0.2% from a month ago, matching the 0.2% increase in June.
“The trend lines look good,” Zandi said, noting that “the July CPI report was great,” especially in comparison to June 2022, when inflation peaked at 9.1% to hit a four-decade high.
Rising housing costs were by far the most important contributor to July’s uptick in prices, accounting for 90% of the advance, the Bureau of Labor Statistics reported, though Zandi didn’t seem too concerned.
When The Post reached out to Moody’s for comment, the financial services firm pointed to commentary from one other economist at the corporate, Bernard Yaros, who said that “the US consumer price index was fully consistent with our and consensus expectations in July.”
“Moody’s Analytics believes that the Federal Reserve is completed with interest-rate hikes for the present tightening cycle, and the July CPI helps cement our near-term view on monetary policy,” he added.
The CPI report fueled questions on whether the Fed will proceed to hike rates of interest later this yr after the Fed selected a 25-basis-point rate hike in July, taking them to a 22-year high.
Fed Chairman Jerome Powell announced that the advance was a unanimous decision, raising the benchmark federal-funds rate to a spread between 5.25% and 5.5%.
Economists were divided on the pending rate hikes following the discharge of the CPI report.
Greg Wilensky, head of US fixed income at Janus Henderson Investors, added: “If economic conditions proceed as expected, we consider we now have seen the last hike for this cycle. This makes us more constructive on adding interest-rate risk, particularly on the front of curve.”
Meanwhile, Raymond James’ Chief Economist Eugenio Aleman believes stubbornly-high shelter costs “are slated to put pressure on headline inflation going forward.”
Little doubt the Fed may also take a look at the Labor Department’s hiring report for July because it considers whether it’s done enough to snuff out inflation.
Last month, US employers added 187,000 jobs, the bottom number since COVID peaked in 2020, though unemployment remained little modified month-over-month, at 3.5%.
The labor market has showed surprising resiliency during the last couple of months, adding 209,000 jobs in June and a sturdy 339,000 jobs in May.
The US is currently having fun with a 30-month streak of monthly job gains.