Note: The Everyday Price Index for July is based on incomplete data due to restrictions on data collection by Bureau of Labor Statistics personnel because of the COVID-19 outbreak.
The general price level may be a function of money supply over the long term, but in the short term, prices can reflect ebbs and flows in supply and demand. That is likely the case for consumer prices over the past few months. As economic activity plunged in March and April then began to show some signs of recovery in May, consumer prices also were generally lower. As reopening unfolded and economic activity began to rebound in June and July, many prices likewise rebounded.
The AIER Everyday Price Index rose 0.5 percent for the month of July, matching the rise in the more encompassing Consumer Price Index (on a not-seasonally-adjusted basis). The Everyday Price index had fallen for three consecutive months in February through April and had been flat or down in eight of 11 months from June 2019 through April 2020 but has now posted three consecutive increases. Over the past year, the Everyday Price Index is now up 0.1 percent after being down 0.2 percent for the 12 months through June 2020.
The Everyday Price Index including apparel, a broader measure that includes clothing and shoes, rose 0.4 percent in July after jumping 1.1 in June. The Everyday Price Index including Apparel had been flat or down in eight of the 12 months from June 2019 through May 2020 but has posted two consecutive gains in June and July 2020. The index is down 0.4 percent over the 12 months through July 2020. Apparel prices fell 0.4 percent on a not-seasonally-adjusted basis in July and are down 6.4 percent over the past year.
The largest contributors to the rise in the Everyday Price index in July were motor fuel prices, telephone services prices (primarily wireless phone services), and restaurant prices. Motor fuel prices jumped 4.7 percent following a 9.8 percent surge in June on a not-seasonally-adjusted basis. However, these increases follow a string of declines between November 2019 and May 2020, leaving the 12-month change at -20.3 percent.
Telephone services prices rose 3.0 percent on a not-seasonally-adjusted basis following small declines in four of the past five months. From a year ago, telephone services prices are up 4.3 percent. Prices for food away from home (restaurants) also rose, increasing 0.5 percent for the second month in a row and are 3.4 percent above July 2019.
Partially offsetting those increases were declines in food at home (groceries) and prices of admissions to movies, theaters, concerts, and sporting events. Grocery prices fell 1.0 percent in July following six consecutive months of increase. From a year ago, grocery prices are up 4.6 percent. Admissions prices fell 3.1 percent for the month but are up only 1.2 percent from a year ago.
The Consumer Price Index, which includes everyday purchases as well as infrequently purchased, big-ticket items and contractually fixed items, also rose 0.5 percent on a not-seasonally-adjusted basis in July, and 0.6 percent after seasonal adjustment. Over the past year, the Consumer Price Index is up just 1.0 percent. Food and energy were significant contributors to the change in the Consumer Price Index in July, with food prices down 0.4 percent while energy prices rose 2.5 percent. For the Consumer Price Index excluding food and energy, the index rose 0.6 percent for the month after seasonal adjustment while the 12-month change came in at 1.6 percent.
Within the core, core goods prices were up 0.7 percent in July and are down 0.5 percent from a year ago while core services prices rose 0.6 percent for the month and are up 2.3 percent from a year ago. The increase in core goods prices was driven by new vehicle prices (up 0.8 percent), used vehicle prices (up 2.3 percent) and tobacco products prices (up 0.8 percent).
Within core services, gains were led by motor vehicle insurance prices (up 9.3 percent), airline fares (up 5.4 percent), car and truck rentals (up 4.0 percent), and moving, storage and freight prices (up 2.3 percent).
Like other economic measures such as production (supply) and consumption (demand), prices have been severely impacted by the shutdown of the economy. Distortions to activity and prices will continue as long as restrictions are in place.