(This interview as been edited for length and clarity.)
Michael R. Englund, Principal director and Chief economist for Action Economics
The markets were looking at inflation reports for July and the markets are really sensitive to when we’re going to see some turn in these rapid gains we’ve seen in prices on a month to month basis and also year to year. Many economists assume June or July would be the month where these year over year numbers we’re finding peak and start to trend down. We did get some good news with CPI. A few of the components that have been rising most rapidly, airfares and used, cars plateaued. So it suggests that perhaps we’re at the end of this transitory period, at least for those sectors. New car prices kept rising however, so that was a bad sign. And in general, a lot of the components are continuing to post gains. So we’re probably near the turn not necessarily out. There are some good signals from CPI. Unfortunately, PPI came out the next day. We saw 1% headline and core gains following the same 1% gains last month. For the core, those were record gains for the headline, they are near records. A big chunk of the PPI report was the service sector. Service sector prices keep climbing. That’s a real source of knowing what’s happening in the service sector. We have financial markets where you contract goods, services are a little more murky. So the fact that those prices continue to climb suggests that we aren’t out of the woods yet with these transitory price gains.