Will inflation keep slowing in the US the rest of 2023? Here’s what the experts say
It’s been a little more than a year since inflation in the United States hit a four-decade high. Disruptions caused by the pandemic led to supply chain bottlenecks limiting goods coupled with American consumers unleashing pent up demand helped drive up prices.
While inflation is still above the Federal Reserve’s target rate, the latest economic data shows promise that inflation is coming to heel. Even though the headline number from the recent Consumer Price Index report showed price increases ticked up in August from the prior month, core inflation, which strips out volatile food and energy costs, dropped to 4.3 percent compared to 4.7 percent in July.
Will inflation keep slowing in the US the rest of 2023? Here’s what the experts say
Two of the areas that economists have been watching for price increases are those on cars and housing.
Since April 2023, the CPI had shown a month-over-month decrease or zero growth in the price of new cars until last month. August registered a 0.3 percent rise, 2.9 percent higher than the same time last year. Used car prices as well have seen significant back-to-back monthly price drops since June. Last month, they were down 6.6 percent year-over-year.
“Right now, we’re seeing some weakening price momentum in goods overall, particularly used cars,” said senior economist at Interactive Brokers José Torres speaking to CNN. “But we’re also seeing new vehicle [prices] slow down, and we think that prices will continue to come down into year-end.”
He credits high interest rates for cooling demand, especially in the motor vehicle category. Additionally, the “sector is just tough for consumers to make purchases in” due to reduced credit availability.
One concern for experts though is the ongoing UAW strike against the ‘Big 3′ that began 15 September. Currently it is limited, but could expand if the union doesn’t see the automakers offering meaningful concessions toward a new contract. The duration of the industrial action could also have a knock-on effect on the supply of parts as the disruption trickles through the automotive industry driving up prices on repairs.
Housing costs expected to continue to slow in 2023
August saw the smallest gain in shelter costs since January 2022 rising just 0.3 percent from the month before. “We’ve seen rental costs decelerate pretty sharply over the past year,” Sarah House, senior economist at Wells Fargo, told CNN. “We’re seeing rents for single-family homes also moderate pretty extensively, and so as that starts to show in the official measures of inflation, we think that there’s a lot more weakness to come out of that sector.” Housing cost are a sizeable portion of the CPI which if they continue to decrease could aid in broader inflation moving closer to the US central bank’s target of two percent.