Aug. 10 (UPI) -- A closely watched government economic gauge showed Wednesday that consumer prices in the United States were virtually unchanged from June to July -- an indication that hot-running inflation has begun to cool.
Most analysts expected the gauge to show that prices increased slightly -- by 0.2% -- for the month, which would have been viewed as a positive sign. Instead, the gauge showed no change at all, which is seen as even more hopeful.
The Commerce Department's Consumer Price Index is a key inflationary gauge that measures the rise or decline in consumer prices from month to month. Last month, it showed that prices increased by 1.3% from May to June, the largest monthly increase in 2022.
Since then, however, gasoline prices in the United States -- one of the main drivers of inflation -- have fallen. Prices at the pump reached an all-time record average of more than $5 per gallon in mid-June; but the national average on Wednesday was down to $4.01, according to AAA. That's 2 cents lower than Tuesday, 15 cents lower than a week ago and nearly 70 cents lower than a month ago.
Gas prices were a major contributor to the inflation slowdown.
"The gasoline index fell 7.7% in July and offset increases in the food and shelter indexes, resulting in the all items index being unchanged over the month," the department said in a statement. "The energy index fell 4.6% over the month as the indexes for gasoline and natural gas declined."
The department also said inflation rose by 8.5% over the 12 months ending in July, which was also slower than economists predicted. Most analysts anticipated that the index would show an annual increase of 8.7%. A month earlier, that figure was over 9%.
Also a factor in cooling inflation is the slow untangling of supply chain problems, which were aided on Tuesday when President Joe Biden signed the CHIPS and Science Act, which aims to increase domestic production of semiconductor chips to ease U.S. over-reliance on foreign-made chips.
"Today we received news that the economy had 0% inflation in the month of July," Biden said at the White House Wednesday. "Here's what that means: While the prices of some things went up last month, the price of other things went down by the same amount."
Biden acknowledged that "people are still hurting," but said that Wednesday's Consumer Price Index showed that inflation is cooling.
"We still have work to do, but we're on track. We're moving in the right direction."
Some analysts say that the cooling of consumer prices is only part of the equation.
"You have about four drivers of inflation right now," Aneta Markowska, chief economist at Jefferies, told CNBC. "You have commodity prices. That's going away. You have supply chain issues. That's going away."
"But you're still left with housing and the labor market, and that's going to show up in services inflation," Markowska said. "And that's driven by shortages in housing and labor. That's not going away anytime soon until the Fed manages to destroy demand and that hasn't happened."
The Federal Reserve has raised key interest rates by a half-point or more at its last three policy meetings. The higher-than-usual hikes are intended to slow spending, which is the primary driver of inflation.
Nonetheless, the supply chain issues have dogged consumer prices in the United States and around the world. Some analysts believe that the problem, which was exacerbated by COVID-19, is finally beginning to improve.
Liz Ann Sonders, chief investment strategist for Charles Schwab & Co. Disclosures, said Wednesday supply chain pressures have eased globally given the decline in supplier delivery time components within several major countries' purchasing managers' index.
"Key to watch ... is trends in stickier components (like shelter), meaningful for Fed, given several median measures are in strong uptrends," Sonders tweeted.
Also expected to have a near-term impact on consumer prices in the United States is the Inflation Reduction Act passed by the Senate this month. It contains numerous measures that are designed to control prices and mitigate causes of inflation in business and labor sectors. It is expected to be passed by the House and sent to the White House for Biden's signature.