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2022: Inflation Headlines, Part 2

2022: Inflation Headlines, Part 2

August 18, 2022

The last blog post in February was also about inflation.  With the July CPI report being released, I thought it would be a good idea to revisit where the inflation situation stands six months later.

Well… July’s CPI report might be the most controversial, or at least most debated on the news and social media, that we have ever seen.  The U.S. Bureau of Labor Statistics (BLS) reported “CPI for all items unchanged in July as fall in gasoline offsets shelter, food increases”.  Once this report was out there was a lot of noise around what exactly that meant. 

First, let’s unpack what the CPI is.  The Consumer Price Index for All Urban Consumers, also known as CPI-U, is the most common CPI measure reported.  It is composed of a “fixed basket” of goods and services that are meant to represent an average urban consumer’s expenses.  The index then tracks the price changes of those goods and services over time.  

Now, what does it mean that this CPI measure was “… unchanged in July…”?  The index is reported by the BLS on a month-over-month basis. 

  • CPI-U ended June 2022 at 295.328
  • CPI-U ended July 2022 at 295.271

You can see there is actually a very slight, maybe even negligible, decrease in the CPI from June to July.  However, the number that often gets reported by media, economists, and commentators is the Year-over-Year (YoY) change in CPI.  This measures the change in CPI from the current month to exactly one year prior.  Let’s look at those numbers:

  • The YoY change in CPI-U for June 2022 was 8.99%
  • The YoY change in CPI-U for July 2022 was 8.5% 

Finally, let’s unpack what actually happened from June to July to cause zero inflation in that time period.

  • Food prices were up 1.1% in July
    • Food at Home up 1.3%
    • Food Away From Home up 0.7%
  • New Vehicles up 0.6%
  • Shelter up 0.5%
  • Medical services up 0.4%
  • Energy prices were down -4.6%
    • Gasoline down -7.7%
  • Used Car & Trucks down -0.4%

As we can see from the above data, which is only a sample of all the different categories, most prices were actually higher in July.  Energy, which includes Gasoline, and Used Cars were the main categories pulling the Index down from June.  

While the flat CPI number from June to July is a welcome sight, it does not mean inflation is over.  All prices are up YoY with Energy leading the way, as of July being up 32.9% from one year ago.  Oil is a major culprit of the inflation we have seen, and while we have some reprieve with oil prices significantly lower recently, we are still set up for above average inflation for the near term.  

One other CPI measure worth watching, is known as Core CPI.  Core CPI takes out food and energy prices because they are the most volatile.  While the total CPI was flat in July, Core prices were actually up 0.3% MoM and 5.9% YoY.  While this YoY number is lowest of the year, meaning Core price inflation may have peaked, it remains elevated and will likely continue to be well above historical average.

 Source: U.S. Bureau of Labor Statistics, Consumer Price Index for All Urban Consumers: All Items in U.S. City Average [CPIAUCSL], retrieved from, August 17, 2022.