MN Inflation Eases With Falling Gas Prices, But Other Costs Rise

MINNESOTA — Inflation is slowing down, led largely by tumbling gasoline prices, but residents of Minnesota will continue to feel pain at grocery stores and other places, according to the July Consumer Price Index report released Wednesday.

Consumer prices jumped 8.5 percent in July, compared with a year earlier, but that was down from the 9.1 percent year-over-year increase in June, a four-decade high, according to the report from the Bureau of Labor Statistics.

Supply chain snarls are also loosening, with fewer ships moored off Southern California ports and shipping costs declining. Prices for commodities like corn, wheat, and copper have fallen steeply.

Minnesota residents paid an average of $3.94 per gallon of gas Wednesday, compared with $4.616 a month ago, according to AAA, but those decreases aren’t enough to offset spiking prices across a wide range of goods and services.

On average, Americans paid 13.1 percent more for groceries in July than they did in the year prior, the largest 12-month increase since the one-year period ending in March 1979. Cereals and bakery products cost 15 percent more than they did at this time last year, dairy and related products cost 14.9 percent more, fruits and vegetables cost about 9.3 percent more.

In Minnesota, prices on fridge staples such as meats, poultry, fish and eggs were still up 12 percent from July 2021.

As for household energy, utility gas service in July was up 58.9 percent from last year. Household energy costs are up by 28.9 percent overall.

Rent prices also increased, by an average of 0.7 percent in July, and are about 5.7 percent higher than in July 2021. Lodging away from home continued to decline, falling 2.7 percent in July after a 2.8 percent decrease in June.

Rent was up 3.9 percent in July when compared to this same period last year in Minnesota.

One-third of Americans rent their homes, and higher rental costs are leaving many of them with less money to spend on other items. Data from Bank of America, based on its customer accounts, shows that rent increases have fallen particularly hard on younger Americans. Average rent payments for so-called Generation Z renters (those born after 1996) jumped 16 percent in July from a year ago, while for Baby Boomers the increase was just 3 percent.

Nationally, new car prices also continued to rise in July, up 10.4 percent from the year prior. Used car and truck prices were up 6.6 percent from July 2021.

Medical care costs 5.1 percent more than a year ago, with a 0.4 percent increase from June to July, down from the 0.7 percent increase from May to June.

President Joe Biden has pointed to declining gas prices as a sign that his policies — including large releases of oil from the nation’s strategic reserve — are helping lessen the higher costs that have strained Americans’ finances, particularly for lower-income Americans and Black and Hispanic households.

Yet Republicans are stressing the persistence of high inflation as a top issue in the midterm congressional elections, with polls showing that elevated prices have driven Biden’s approval ratings down sharply.

On Friday, the House is poised to give final congressional approval to a revived tax-and-climate package pushed by Biden and Democratic lawmakers. Economists say the measure, which its proponents have titled the Inflation Reduction Act, will have only a minimal effect on inflation over the next several years.

Inflation is expected to remain far above the Federal Reserve’s annual target through 2023 or even into 2024. Fed Chair Jerome Powell has said the Fed needs to see a series of declining monthly core inflation readings before it would consider pausing its rate hikes. The Fed has raised its benchmark short-term rate at its past four rate-setting meetings, including a three-quarter point hike in both June and July — the first increases that large since 1994.

A blockbuster jobs report for July that the government issued Friday — with 528,000 jobs added, rising wages and an unemployment rate that matched a half-century low of 3.5 percent — solidified expectations that the Fed will announce yet another three-quarter-point hike when it next meets in September. Robust hiring tends to fuel inflation because it gives Americans more collective spending power.

Stubborn inflation isn’t just a U.S. phenomenon. Prices have jumped in the United Kingdom, Europe and in less developed nations such as Argentina.
In the U.K., inflation soared 9.4 percent in June from a year earlier, a four-decade high. In the 19 countries that use the euro currency, inflation reached 8.9 percent in June compared with a year earlier, the highest since record-keeping for the euro began.

The Associated Press contributed reporting.