Wall Street is praising the latest inflation numbers for showing a small decline. Is inflation over? Well, if you put your blinders on and just focus on the Consumer Price Index, maybe you could draw the conclusion that we are making progress. Of course, every trend does not increase in a straight line and takes pauses for a while.
Progress on the inflationary front comes down to discretionary versus non-discretionary items. Prices are coming down for items that we can choose to buy or not. It is up to our discretion as to whether we purchase. Today consumers are backing off of higher-priced purchases because they can do without them. Every item has a price point.
Meanwhile, discretionary items or items that we cannot do without are climbing. For example, if you still eat food, you're still feeling the pinch of higher prices. The food index is up 10.9%—the largest 12-month increase in 43 years.
Food at home prices soared another 1.3% in July and are up 13.1% over the past year. Even though gas prices were thankfully down, energy costs were up roughly 32%. Here is a breakdown of the components of the CPI.
Decreases in the prices of used cars and clothes don’t put food on the table.
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