Evelyn Reynolds

High unemployment, a housing market in crisis and sluggish consumer spending during lockdowns are putting pressure on Beijing in a year when officials are focused on projecting stability.When countries around the world have stumbled in the face of pandemic headwinds, China has often stood apart, seemingly impervious to financial pressures that undermined growth.But now, dragged down by its commitment to curbing the spread of Covid-19 with widespread lockdowns and mass quarantines, China has suffered one of its worst quarters in years, threatening a global economy heavily dependent on Chinese factories and consumers.For the country’s ruling Communist Party, the downturn could put added pressure on Beijing at a sensitive moment. China is scheduled to hold its party congress later this year. A thriving economy and growing wealth was part of the bargain that Chinese citizens accepted in exchange for living under authoritarian rule.But the lockdowns, a staple of Beijing’s zero-Covid policy, have heightened the risk of instability — both socially and economically.The National Bureau of Statistics in China said on Friday that the economy expanded 0.4 percent from a year earlier in the second quarter, worse than some economists’ expectations. It was the lowest growth rate since the first three months of 2020, when the country effectively shut down to fight the early stages of the pandemic, and its economy shrank for the first time in 28 years.The 2020 downturn was short-lived, with the Chinese economy recovering almost immediately. But the current outlook is not so promising. Unemployment is close to the highest levels on record. The housing market is still a mess, and small businesses are bearing the brunt of weakness in consumer spending.“China is the shoe that has never dropped in the global economy,” said Kenneth Rogoff, a professor of economics at Harvard University and a former chief economist for the International Monetary Fund. “China is no position to be the global engine of growth right now, and the long-term fundamentals point to much slower growth in the next decade.”Construction in Beijing this month. China has urged local authorities to step up measures to ensure job stability during lockdowns.Wang Zhao/Agence France-Presse — Getty ImagesThis is an unwanted complication in a year when China is trying to project unwavering strength and stability. At the party congress, Xi Jinping, the country’s leader, is expected to coast to another five-year term, further cementing his grip on power.In May, Li Keqiang, China’s premier, called an emergency meeting and sounded the alarm about the need to gin up economic growth to more than 100,000 officials from businesses and local governments. The stark warning cast doubt about China’s ability to reach its earlier growth target of 5.5 percent for the year. The Latest on China: Key Things to KnowCard 1 of 6China’s economy stumbles. More

Russian natural gas has fired the furnaces that create molten stainless steel at Clemens Schmees’s family foundry since 1961, when his father set up shop in a garage in the western part of Germany.It never crossed Clemens’s mind that this energy flow could one day become unaffordable or cease altogether. Now Mr. Schmees, like thousands of other chieftains at companies across Germany, is scrambling to prepare for the possibility that his operations could face stringent rationing this winter if Russia turns off the gas.“We’ve had many crises,” he said, sitting in the company’s branch office in the eastern city of Pirna, overlooking the Elbe River valley. “But we have never before had such instability and uncertainty, all at once.”Such sentiments are reverberating this week in executive suites, at kitchen tables and in government offices as Nord Stream 1, the direct gas pipeline between Russia and Europe, was shut down for 10 days of scheduled maintenance.Germany, the pipeline’s terminus and a gas transit hub for the rest of Europe, is the largest and most important economy on the continent. And anxiety that President Vladimir V. Putin may not switch the gas back on — as a display of brinkmanship with countries that oppose Russia’s invasion of Ukraine — is particularly sharp.“We have never before had such instability and uncertainty, all at once,” said Clemens Schmees, whose family has owned a foundry since 1961.Lena Mucha for The New York TimesIn Berlin, officials have declared a “gas crisis” and triggered an emergency energy plan. Already landlords, schools and municipalities have begun to lower thermostats, ration hot water, close swimming pools, turn off air-conditioners, dim streetlights and exhort the benefits of cold showers. Analysts predict that a recession in Germany is “imminent.” Government officials are racing to bail out the largest importer of Russian gas, a company called Uniper. And political leaders warn that Germany’s “social peace” could unravel.The crisis has not only set off a frantic clamber to manage a potentially painful crunch this winter. It has also prompted a reassessment of the economic model that turned Germany into a global powerhouse and produced enormous wealth for decades.Nearly every country on the continent is facing potentially profound energy shortages, soaring prices and slower growth. On Thursday, the European Commission cut its growth forecast for this year to 2.7 percent. In another sign of recession anxiety, the value of the euro dipped below the dollar this week.Still, “Germany is worse off than the eurozone as a whole,” said Jacob Kirkegaard, a senior fellow at the German Marshall Fund in Brussels.The Russia-Ukraine War and the Global EconomyCard 1 of 7A far-reaching conflict. More

Further losses may be on the way, even after a 20 percent drop in the first half of the year, as Wall Street continues to price in the Fed’s aggressive interest rate policy.Investors had an awful start to the year as stocks twice entered bear market territory, falling more than 20 percent. Stocks didn’t hang there long the first time, but the second drop has proved more durable, as Wall Street has come to accept that inflation is more persistent and that the Federal Reserve will have to be more aggressive in combating it.The S&P 500 lost 16.4 percent in the second quarter, leaving it 20.6 percent below its level at the end of 2021.Where to now? While a bounce in stocks certainly seems due, investment advisers say a lasting recovery is unlikely for now. They warn that a recession is probably on the way, if it’s not here already, and that valuations remain high, even after the big decline.“I think we’re in for a lot more pain, probably, in U.S. stocks,” said Meb Faber, chief investment officer of Cambria Investment Management. “Just to get back to historical valuations, we could easily go down a third from here.”Ella Hoxha, a manager of global bond portfolios for Pictet Asset Management, said expectations still haven’t been adjusted to incorporate the likely risk of a recession. It may seem surprising that a recession could catch Wall Street by surprise when the conversation there is about little else. But until recently, Wall Street played down its chances and talked up the prospects of a soft landing, in which growth slows but the economy avoids major, prolonged disruption.“The odds of a recession have gone up, but the markets have not fully priced in the recession case yet,” Ms. Hoxha said. “Not only is the Fed having to correct being too dovish last year, it has to unwind its balance sheet” by selling the bonds and other securities it bought to support the economy and markets.Mutual FundsHighlights of mutual fund performance in the second quarter. More

Economists warn that a blitz of midterm election campaign ads could push consumer prices even higher.WASHINGTON — Triple-digit gasoline bills. Bulging hamburger prices. A Fourth of July holiday that broke the bank.Prices are rising at the fastest rate in four decades, a painful development that has given Republicans a powerful talking point just months ahead of the midterm elections. With control of Congress very much in play, Republicans are investing heavily in a blitz of campaign advertisements that portray a dark sense of economic disarray as they seek to make inflation a political albatross for President Biden and Democrats.According to Kantar’s Campaign Media Analysis Group, candidates running in House, Senate and governor races around the country have spent nearly $22 million airing about 130,000 local and national television ads that mention inflation from early April through the beginning of July. Inflation was the 10th most common issue mentioned by Democrats and 11th most common for Republicans, according to the data, underscoring how critical the issue is to both parties this election cycle.The data released Wednesday showing that prices in June climbed 9.1 percent over the past year gave Republicans fresh ammunition against Mr. Biden and his party, ammunition that includes faulting Democrats for passing a $1.9 trillion stimulus package last year and efforts to push through additional spending in a sweeping climate and economic package known as “Build Back Better.”The intensifying focus on inflation is already weighing on Mr. Biden’s poll numbers. A New York Times/Siena College poll this week showed his approval at a meager 33 percent, with 20 percent of voters viewing jobs and the economy as the most important problem facing the country. Inflation and the cost of living followed closely behind. The poll also showed that the race for control of Congress is surprisingly tight.While gas prices have fallen from their $5 a gallon peak and there are signs that inflation might be slowing, consumers are unlikely to feel better off anytime soon. Gas prices are still much higher than they were a year ago, with the average national price for a gallon at $4.60 versus $3.15 in 2021, according to AAA.Voters view jobs and the economy as among the most important issues facing the country.Hiroko Masuike/The New York Times“It’s a very negative thing politically for the Democrats,” said Jason Furman, an economist at Harvard University and former Obama administration economic adviser. “My guess is that the negative views about inflation are so deeply baked in that nothing can change in the next few months to change them.”The White House, while acknowledging the pain that inflation is causing, has tried to deflect responsibility, saying that it is a global problem and attributing it to shortages of food and oil stemming from Russian President Vladimir V. Putin’s invasion of Ukraine.On Wednesday, Mr. Biden called the latest Consumer Price Index “out-of-date” given the recent fall in gas prices and said the data “is a reminder that all major economies are battling this Covid-related challenge, made worse by Putin’s unconscionable aggression.”8 Signs That the Economy Is Losing SteamCard 1 of 9Worrying outlook. More

The producer price index rose 11.3% from a year ago in June, near the record 11.6% posted in March.
Excluding food, energy and trade, core PPI was up 6.4%. The monthly gain of 0.3% was below expectations.
Jobless claims jumped to 244,000 last week, the highest level since November 2021.

Inflation hit hard at the wholesale level in June, as producer prices surged a near-record amount from a year ago due to a big jump in energy costs, the Bureau of Labor Statistics reported Thursday.
The producer price index, a measure of the prices received for final demand products, increased 11.3% from a year ago, the highest reading since the record 11.6% in March.

Of that gain, almost 90% came from a 10% increase in final demand energy costs as prices for oil, natural gas and other products soared during the month.
Excluding energy, as well as food and trade service prices, so-called core PPI rose 6.4% on a 12-month basis, a deceleration from the 6.8% gain in May.
On a monthly basis, the core measure increased just 0.3%, below the 0.5% Dow Jones estimate. Headline PPI rose 1.1% on the month, higher than the 0.8% estimate.
The release comes one day after the BLS reported that the consumer price index, which measures final-sale prices in the marketplace, surged 9.1%, the highest 12-month gain since November 1981.
In a separate Labor Department report, weekly jobless claims rose to 244,000 for the week ended July 9, the highest number since Nov. 20, 2021. Continuing claims, which run a week behind the headline number, fell to 1.33 million, a decline of 41,000.

While there are signs the jobs market is weakening, the focus has been on inflation.
Energy and food prices have been particularly burdensome, but the June reports show price pressures are broadening.
There were a few optimistic signs in the PPI report — prices for chicken eggs, for instance, tumbled 30.2%, while iron and steel scrap prices were off 10.4%.
However, Federal Reserve officials are expected to keep pressing forward on interest rate hikes to bring inflation down closer to their longer-run 2% goal.
Following the CPI release, traders were pricing in an 86% chance the central bank, at its meeting later this month, will raise benchmark interest rates by a full percentage point. That would be the largest such increase since the early 1980s.

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Prices surged 9.1 percent in June as consumers faced rapidly rising costs for gas, food and rent, a higher-than-expected reading and bad news for Americans at a moment when their wages are falling further behind the nation’s soaring cost of living.The fresh Consumer Price Index report released on Wednesday contained particularly worrying signs for the Federal Reserve, providing evidence that price pressures are broad and stubborn in ways that may make them difficult to wrestle under control.Overall, inflation is likely to moderate in July because gas prices have fallen this month — a gallon of regular gas hit an average of about $5 in June, and the cost is now hovering around $4.63. But fuel prices are volatile, making it impossible to know if today’s lower gas prices will last, and the report suggested that underlying inflation pressures remained intense.In particular, a core inflation index that strips out food and fuel prices to give a sense of the broad trend remained surprisingly high. That measure climbed 5.9 percent over the year through June, barely a slowdown from last month’s 6 percent increase. Core prices also jumped 0.7 percent from May to June, more than the previous monthly increase.Persistent price gains portend trouble for President Biden, whose approval ratings have taken a hit amid climbing costs, and could require continued forceful action from the Fed. The central bank is raising rates to slow the economy and to try to restrain inflation, and it is likely to continue adjusting policy quickly — even if doing so risks tipping the economy into a recession — as inflation looks increasingly out of control.“It’s an ugly report,” said Julia Coronado, the founder of MacroPolicy Perspectives. “I don’t think there is anything good about this report, as far as the Fed is concerned, as far as the U.S. consumer is concerned.”The global economy has been buffeted by a series of shocks that have pushed inflation higher since the outset of the pandemic. Factory shutdowns and shipping shortages have roiled supply chains, and worker shortages are making it harder for airlines to fly at capacity and for hotels to rent out rooms. Russia’s invasion of Ukraine has disrupted gas and food supplies.President Biden has acknowledged the pain that inflation is causing, calling it “unacceptably high” in a statement on Wednesday. Erin Schaff/The New York TimesWhile economic policymakers initially hoped that the disruptions would fade and that prices would ease on their own, they have stopped waiting for that to happen — especially as price increases prove not only pronounced but also widespread, rising rapidly across an array of goods and services.The Fed has been raising interest rates since March in an effort to slow consumer and business demand, hoping to cool the economy and bring inflation back down. The central bank has sped up those rate moves as price increases have proved surprisingly stubborn, and the new inflation report spurred speculation that the Fed might turn even more aggressive.Read More About Oil and Gas PricesPrices Drop Sharply: U.S. gas prices have been on the decline, offering some relief to drivers. But weather, war and demand will influence how long it lasts.Gas Tax Holiday: President Biden called on Congress to temporarily suspend the federal gas tax, but experts remain skeptical the move would benefit consumers much.‘Only Bad Options’: Mr. Biden’s trip to Saudi Arabia is unlikely to reduce oil prices. And it is not clear that anything else he might do would work, either.Summer Driving Season: The spike in gas prices is being driven in part by vacationers hitting the road. Here’s what our reporter saw on a recent trip.Officials lifted rates by 0.75 percentage points in June, the biggest move since 1994, and had been expected to make a similarly sized move at its meeting in late July. But after the new inflation data, investors began to expect a percentage-point move, based on market pricing.Fed officials themselves were hesitant to call for such a large move.“My most likely posture is 0.75, because of the data I’ve seen,” Mary Daly, president of the Federal Reserve Bank of San Francisco, said in an interview Wednesday night. She explained that she had expected a high number, so the report did not sway her.“I saw that data and thought: This wasn’t good news, wasn’t expecting good news,” she said.Ms. Daly said she could see a situation in which a bigger, one-percentage-point increase would be possible should consumer inflation expectations move higher and consumer spending fail to slow down.Loretta Mester, president of the Federal Reserve Bank of Cleveland, said on Bloomberg Television on Wednesday night that the new inflation report was “uniformly bad” and that there would be no reason to do less than the 0.75 points that the Fed approved in June. But she also suggested that she would watch incoming data and wait to see how the economy evolved before deciding whether an even larger move might be appropriate. The Fed’s next policy meeting is July 26-27.Raphael Bostic, the president of the Federal Reserve Bank of Atlanta, told reporters on Wednesday that “everything is in play,” but he, too, made it clear that he was “not wedded to any specific course of action.”Even a 0.75-point increase would be an unusually quick pace for a central bank that has tended to move gradually in recent decades. The Fed risks tipping the economy into a recession as it rapidly raises interest rates, because those increases might hit the brakes on the economy so hard that they jar businesses, prompting them to stop hiring and setting off a chain reaction in which households are left with less money to spend.But policymakers feel that they must choke off inflation quickly even if it increases the chance of a painful slowdown. That’s because they worry that, as inflation remains rapid, consumers and businesses could be getting used to it.If people begin to ask for higher wages in anticipation of price increases — negotiating cost-of-living adjustments of 6 or 7 percent, for example, instead of the typical 2 to 3 percent — companies could try to pass their swelling labor costs along to customers by raising prices. That could perpetuate rapid inflation, making it much trickier for the Fed to stamp it out.“The path toward price stability is going to entail some pain, but less pain if we do it than if we don’t do it,” Ms. Mester said.Meals at restaurants, tickets for sporting events and other services are growing more expensive.Amir Hamja for The New York TimesInflation is high across much of the world right now, as Russia’s invasion of Ukraine pushes up food and fuel prices and transportation and manufacturing issues continue to keep some goods scarce. But the new inflation report also shows evidence of price pressures that have little to do with global supply. Meals at restaurants, tickets for sporting events and other services are growing more expensive.For consumers, the fresh report is confirmation that it is increasingly tough to make ends meet. While wages are rising, they have failed to keep up with rapid price increases. After accounting for price increases, average hourly earnings have declined 3.6 percent over the past year.At the same time, necessities are becoming more expensive. Food prices overall rose 10.4 percent in June from a year earlier, the biggest annual increase since 1981. Rent for a house or an apartment also costs significantly more, having climbed at the fastest monthly pace since 1986.That is making life difficult for many families. Soaring housing costs have made relocating difficult for Elizabeth Haynes, 41, who lives with her husband in McKinney, Texas. The couple wants to relocate to another state, but high housing costs are so far prohibitive.“We’re trying to get out of Texas, and that’s proving really difficult with the rental costs and the housing costs and the shortages and all of that,” said Ms. Haynes, who is hoping to land a place she can afford in Connecticut. “So that’s kind of our big pain point.”As rapid price increases burden many Americans, they are also taking a toll on economic confidence, posing a big challenge for Mr. Biden and Democrats ahead of the midterm elections. Mr. Biden has acknowledged the pain inflation is causing, saying in a statement on Wednesday that it is “unacceptably high.”But he also called the report “out of date” because it did not capture the recent retreat in prices at the gasoline pump and in other commodities. Democrats have suggested things will soon get better, pointing out that, as fuel costs subside, overall inflation is likely to decline from its 9.1 percent reading in June.“I think we’re peaking — I think we’re going to be going down from here,” Representative Nancy Pelosi, the House speaker, said when asked for her reaction to the new data.While there is hope in Washington and on Wall Street that inflation will come down sustainably, economists have repeatedly suggested that inflation has peaked over the past 12 months only to watch it pick back up.That is partly because prices for certain goods have behaved strangely: Cars have been in short supply, and their prices have been skyrocketing, for instance. It is also partly because economists have dismissed big price swings in various goods and services as temporary one-offs, and the surprises have just continued to add up.“People have not done a very good job of predicting car inflation,” said Jason Furman, an economist at Harvard. “Beyond that, inflation is about more than 10 individual stories about 10 individual goods and services — it’s about forces in the overall economy.”If people begin to ask for higher wages in anticipation of price increases, companies could try to pass their swelling labor costs along to customers by raising prices.Hiroko Masuike/The New York TimesThat said, there are some reasons that today’s rapid price gains could abate based on the economy’s fundamentals.Consumers may struggle to sustain their spending as prices jump. If they move in with roommates, stop taking vacations or pull back on social activities to save money, supply could begin to catch up with demand, allowing price gains to decelerate.Stores including Target are already trying to sell off bloated inventories, which could allow retail prices to slow. Costs for goods including sporting equipment and televisions have already begun to cool.But, for now, hints at and forecasts for a cool-down are likely to be insufficient comfort for economic policymakers when there is little sign in the data that any concerted pullback is kicking in.“We have to be so humble about forecasting inflation,” said Blerina Uruci, an economist at T. Rowe Price, who does expect inflation pressures to fade. “We’ve just been so wrong, so consistently, in one direction.”Reporting was contributed by More

Prices surged 9.1 percent in June as consumers faced rapidly rising costs for gas, food and rent, a higher-than-expected reading and bad news for Americans at a moment when their wages are falling further behind the nation’s soaring cost of living.The fresh Consumer Price Index report released on Wednesday contained particularly worrying signs for the Federal Reserve, providing evidence that price pressures are broad and stubborn in ways that may make them difficult to wrestle under control.Overall, inflation is likely to moderate in July because gas prices have fallen this month — a gallon of regular gas hit an average of about $5 in June, and the cost is now hovering around $4.63. But fuel prices are volatile, making it impossible to know if today’s lower gas prices will last, and the report suggested that underlying inflation pressures remained intense.In particular, a core inflation index that strips out food and fuel prices to give a sense of the broad trend remained surprisingly high. That measure climbed 5.9 percent over the year through June, barely a slowdown from last month’s 6 percent increase. Core prices also jumped 0.7 percent from May to June, more than the previous monthly increase.Persistent price gains portend trouble for President Biden, whose approval ratings have taken a hit amid climbing costs, and could require continued forceful action from the Fed. The central bank is raising rates to slow the economy and to try to restrain inflation, and it is likely to continue adjusting policy quickly — even if doing so risks tipping the economy into a recession — as inflation looks increasingly out of control.“It’s an ugly report,” said Julia Coronado, the founder of MacroPolicy Perspectives. “I don’t think there is anything good about this report, as far as the Fed is concerned, as far as the U.S. consumer is concerned.”The global economy has been buffeted by a series of shocks that have pushed inflation higher since the outset of the pandemic. Factory shutdowns and shipping shortages have roiled supply chains, and worker shortages are making it harder for airlines to fly at capacity and for hotels to rent out rooms. Russia’s invasion of Ukraine has disrupted gas and food supplies.President Biden has acknowledged the pain that inflation is causing, calling it “unacceptably high” in a statement on Wednesday. Erin Schaff/The New York TimesWhile economic policymakers initially hoped that the disruptions would fade and that prices would ease on their own, they have stopped waiting for that to happen — especially as price increases prove not only pronounced but also widespread, rising rapidly across an array of goods and services.The Fed has been raising interest rates since March in an effort to slow consumer and business demand, hoping to cool the economy and bring inflation back down. The central bank has sped up those rate moves as price increases have proved surprisingly stubborn, and the new inflation report spurred speculation that the Fed might turn even more aggressive.8 Signs That the Economy Is Losing SteamCard 1 of 9Worrying outlook. More

The consumer price index increased 9.1% from a year ago in June, above the 8.8% Dow Jones estimate.
Excluding food and energy, core CPI rose 5.9%, compared with the 5.7% estimate.
Costs surged for gasoline, groceries, rent and dental care.
Adjusted for inflation, workers’ hourly wages fell 1% during the month and are down 3.6% from a year ago.

Shoppers paid sharply higher prices for a variety of goods in June as inflation kept its hold on a slowing U.S. economy, the Bureau of Labor Statistics reported Wednesday.
The consumer price index, a broad measure of everyday goods and services related to the cost of living, soared 9.1% from a year ago, above the 8.8% Dow Jones estimate. That marked the fastest pace for inflation going back to November 1981.

Excluding volatile food and energy prices, so-called core CPI increased 5.9%, compared with the 5.7% estimate. Core inflation peaked at 6.5% in March and has been nudging down since.
On a monthly basis, headline CPI rose 1.3% and core CPI was up 0.7%, compared to respective estimates of 1.1% and 0.5%.
Taken together, the numbers seemed to counter the narrative that inflation may be peaking, as the gains were based across a variety of categories.
“CPI delivered another shock, and as painful as June’s higher number is, equally as bad is the broadening sources of inflation,” said Robert Frick, corporate economist at Navy Federal Credit Union. “Though CPI’s spike is led by energy and food prices, which are largely global problems, prices continue to mount for domestic goods and services, from shelter to autos to apparel.”
The inflation reading could push the Federal Reserve into an even more aggressive position.

Traders upped their bets on the pace of interest rate increases ahead. For the July 26-27 meeting, a full percentage point move now has a better than even chance of happening, according to the CME Group’s FedWatch tool as of 10:40 a.m. ET.
“U.S. inflation is above 9%, but it is the breadth of the price pressures that is really concerning for the Federal Reserve.” said James Knightley, ING’s chief international economist. “With supply conditions showing little sign of improvement the onus is the on the Fed to hit the brakes via higher rates to allow demand to better match supply conditions. The recession threat is rising.”

Up across the board

Energy prices surged 7.5% on the month and were up 41.6% on a 12-month basis. The food index increased 1%, while shelter costs, which make up about one-third of the CPI rose 0.6% for the month and were up 5.6% annually. This was the sixth straight month that food at home rose at least 1%.
Rental costs rose 0.8% in June, the largest monthly increase since April 1986, according to the BLS.
Stocks mostly slumped following the data while government bond yields surged.
Much of the inflation rise came from gasoline prices, which increased 11.2% on the month and just shy of 60% for the 12-month period. Electricity costs rose 1.7% and 13.7%, respectively. New and used vehicle prices posted respective monthly gains of 0.7% and 1.6%.
Medical-care costs climbed 0.7% on the month, propelled by a 1.9% increase in dental services, the largest monthly rise ever recorded for that sector in data that goes back to 1995.
Airline fares were one of the few areas seeing a decline, falling 1.8% in June though still up 34.1% from a year ago. The meat, poultry, fish and eggs category also dropped 0.4% for the month but is up 11.7% on an annual basis.
The increases marked another tough month for consumers, who have been suffering through soaring prices for everything from airline tickets to used cars to bacon and eggs.

Real incomes fall further

For workers, the numbers meant another hit to the wallet, as inflation-adjusted incomes, based on average hourly earnings, fell 1% for the month and were down 3.6% from a year ago, according to a separate BLS release.
Policymakers have struggled to come up with answer to a situation that is rooted in multiple factors, including clogged supply chains, outsized demand for goods over services, and trillions of dollars in Covid-related stimulus spending that has made consumers both flush with cash and confronted with the highest prices since the early days of the Reagan administration.
Federal Reserve officials have instituted a series of interest rate increases that have taken benchmark short-term borrowing costs up by 1.5 percentage points. The central bank is expected to continue hiking until inflation comes closer to its 2% longer-run target rate.
White House officials have blamed the uptick in prices on Russia’s invasion of Ukraine, though inflation was already moving aggressively higher before that attack in February. President Joe Biden has called on gas station owners to lower prices.
The administration and leading Democrats also have blamed what they call greedy corporations for using the pandemic as an excuse to raise prices. After-tax corporate profits, however, have increased just 1.3% in aggregate since the second quarter of 2021, when inflation took hold.
In a statement following the report, Biden said “tackling inflation is my top priority,” and repeated previous calls for oil and gas companies to lower prices and Congress to vote on legislation he said will reduce costs for various products and services.
There is some reason to think the July inflation numbers will cool.
Gasoline prices have come down from their June peak, with a gallon of regular falling to $4.64, a 4.7% drop for the month, according to Energy Information Administration data.
The S&P GSCI commodities index, a broad-based measure of prices for multiple goods, has fallen 7.3% in July, though it remains up 17.2% for the year. That has come as wheat futures have fallen 8% since July 1, while soybeans are down 6% and corn is off 6.6% during the same period.

View from the trucking industry

“I see a light at the end of the tunnel,” said Brian Antonellis, senior vice president of fleet operations for Fleet Advantage, a leasing and asset management company for the trucking industry based in Fort Lauderdale, Florida.
Antonellis expects production capacity to ramp up gradually, helping to create a more competitive environment for an industry that has felt the strain of rising fuel prices, a historically tight labor market and the supply chain issues that have hampered the ability to get products to shelves.
“For probably 10 to 15 years before the pandemic, the industry fell into a stable routine where costs up across the board somewhere between 1 to 3 percent a year. It was easy to budget, it was easy to forecast, it was easy to build into rates,” he said. “The challenge we face today is it’s not that 1-3 percent anymore, it’s 10 to 20 percent depending on what cost bucket you’re talking about.”
Still, he said trucking companies are managing to get through with pricing power and creative financing.
“I do think people honestly are not trying to overcharge the customer,” Antonellis said. “They’re not being predatory about it. But they are trying to find that fine line. What do we pass forward? How do we look at the costs coming in?”
With the U.S. economic picture getting increasingly cloudy, he acknowledged that the industry is not “recession-proof.”
“There are going to be challenges,” Antonellis said. “I don’t think it’s all negative. I do think there will be challenges for the next six months. But I do think we’re on an upswing.”
Correction: The June CPI gain was the strongest since November 1981. An earlier version misstated the month. The estimate for core CPI was 5.7%. An earlier version misstated the percentage.

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