The important consumer price index ( Real Earnings) for June came out on Thursday morning. It went down by 0.1% from the month before. This is the first time it has dropped since May 2020. People are wondering if the Federal Reserve will cut interest rates. This news is good for markets if inflation keeps decreasing from May’s rate of 3.3%.
Inflation and Wages:
Inflation was very high at 9% a year in June 2022. This was much higher than wages, which never grew more than 6%. But by May of last year, real earnings (what wages can buy after price increases) were getting better month by month.
Good News for Wallets:
This news is also good for people’s wallets. Incomes have been rising, which helps with price increases. In June, average hourly earnings went up by 3.9%.
Cautious Spending:
“We’re seeing people being careful with their spending. They are cutting back on non-essential items when they can,” said Mike Fratantoni, chief economist at the Mortgage Bankers Association.
Income Gains and Feelings:
“Some people tell us their income has grown faster than inflation,” said Joanne Hsu, director of the University of Michigan consumer surveys. But this hasn’t made people feel much better, she said. “These gains have been reduced by ongoing inflation and high prices.” These higher prices have affected how people spend their money.
Feelings Among Earners:
The top earners are feeling more positive. But Hsu noted that most middle- and lower-income consumers are just trying to keep up and don’t see much hope of getting ahead.“We’re seeing people being careful with their spending. They are cutting back on non-essential items when they can,” said Mike Fratantoni, chief economist at the Mortgage Bankers Association.