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Inflation slows a bit in July. Has it finally peaked?

Don Lee, Los Angeles Times on

Published in Business News

WASHINGTON — After months of steadily climbing to a 40-year high, the pace of inflation slowed notably in July as gas prices fell sharply and Americans got some relief on the cost of clothing, cars and other necessities.

The annual rate of inflation, as measured by the consumer price index, edged down to 8.5% in July from 9.1% in June, according to the Bureau of Labor Statistics in a report issued Wednesday.

The June inflation figure, the highest since November 1981, is now looking like it may have been the peak of the price surge that began in spring 2021.

If inflation continues a slow but steady decline — as most economists now consider likely — it will be especially welcomed by middle-class and lower-income households that must spend much of what they earn on such staples as apparel and fuel.

And the slowdown in inflation could not be more welcome to the Biden administration and other Democrats haunted by fears that voter fury over continual surges in the cost of living would translate into disaster at the polls.

Those political fears were all the greater because inflation was not only negating recent wage gains, but had ambushed Americans lulled by decades of near-stagnant prices for most goods and services.

 

That period of price stability was highly unusual in the long sweep of U.S. economic history, but it lasted so long that many Americans came to take it for granted.

The sudden reemergence of inflation largely eclipsed the positive news about the economy over the past year, including the rapid and robust recovery from the pandemic and a burst of wage gains after years of income stagnation for all but the most highly paid workers.

Unhappiness over inflation has been widely seen as one of the primary reasons for Biden’s low approval ratings.

The July inflation report comes on the heels of other recent positive developments that include the retreat in gas prices, resilient job growth and a rebound in stock markets.

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