Day: 14 August 2024

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U.S. inflation slows in July 2024

U.S. inflation

U.S. consumer prices (CPI) increased at the slowest rate in over three years last month, further supporting the argument for the Fed to begin reducing interest rates.

According to the U.S. Labor Department, prices climbed 2.9% in the 12 months leading up to July 2024, marking the smallest yearly rise since March 2021 and a decrease from 3% in June 2024.

The monthly inflation report was under intense scrutiny following indications of weaker-than-anticipated job growth in July, which earlier this month led to upheaval in the stock market and concerns about a recession.

Analysts have suggested that these figures should persuade the Federal Reserve that the elevated borrowing costs are effectively bringing inflation back to its target levels, despite the recent increases in housing and food prices.

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UK inflation rate climbs to 2.2%

UK inflation

The UK’s inflation rate has risen for the first time this year, official ONS figures show.

This indicates that overall prices increased by 2.2% in the year leading up to July, a rise from 2% in June, surpassing the Bank of England’s target.

The anticipated increase is primarily attributed to the less significant drop in gas and electricity prices compared to the previous year.

The Bank of England reportedly anticipates a further increase in inflation this year before it declines again.

The core inflation rate, which is the Consumer Price Index (CPI) excluding food, energy, alcohol, and tobacco prices, was reported at 3.3% in July, a slight decrease from 3.5% in June, according to the statistics office.

Additionally, service inflation, which the Bank of England (BoE) monitors closely, decreased to 5.2% in July from 5.7% the previous month, yet still remains elevated.

These inflation statistics follow the release of data on Tuesday 13th July 2024, which revealed that the average wage growth excluding bonuses was 5.4% from April to June year-on-year, the lowest in two years.

Concurrently, the unemployment rate dropped to 4.2% during this period, down from 4.4% between March and May 2024.

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Do falling commodity prices indicate there is trouble brewing with the U.S. economy?

Commodities

Falling commodity prices can be a signal of economic trouble ahead

When commodity prices drop, it often reflects a decrease in demand for raw materials, which can be a sign of slowing economic activity. For instance, the recent decline in copper prices is seen as a potential indicator of economic slowdown.

Sugar, cotton, soybean, oil and iron ore are some examples where demand has fallen during this year.

However, it’s important to consider other factors as well. The global economic slowdown has reduced demand for energy, minerals, and agricultural products. While this trend is evident in many countries, the U.S. economy has shown some resilience.

So, while falling commodity prices can be a warning sign, they are just one piece of the puzzle. It’s essential to look at a broader range of economic indicators to get a complete picture.

Commodity price charts as of: 13th August 2024

Copper one year chart

Iron ore one year chart

Cotton price one year chart

Sugar one year price chart

Soybeans one year price chart

U.S. oil one year price chart