The July consumer inflation data is out, and it's bad. Official CPI at 5.6% year-over-year is the worst since 1990. Food prices were up +.9% in a month. Energy prices up +1.9% in July.
Put this on top of the import inflation in excess of +20% reported a few days ago, and you have a bad situation. Americans' purchasing power hasn't nearly kept up with the goods and services they must buy. Wage growth over the last year has only been +3.4%, meaning wage earners have lost -2.2% in purchasing power.
Simply put, average Americans' standard of living has taken a big hit.
Cross-posted at The Economic Populist
Here's the graph showing the brutal detail (yearly wage growth in blue, inflation in red):
Notice that this is the first time that hourly earnings have actually decreased in the face of rising inflation. This is exactly how I have been predicting the "Panic of 2008" would play out: increasing import prices, declining domestic asset prices, and stagnant wages all combining to create a major decline American's standard of living.
This being a New Deal democrat diary, there is a silver lining; namely, the July CPI did not reflect the recent dramatic decline in Oil from $147/barrel. If Oil prices continue their decline, or just stabilize at $113-$120/barrel, then almost certainly July inflation is as bad as it gets in this cycle. Here's a graph of the price of Oil vs. CPI for energy over the last 10 years. Notice that CPI energy always follows a turning point with no more than a one month lag:
Energy inflation is very seasonal. The raw energy inflation data for May/June/July for the prior ten years' averages compared with 2008 is:
May +2.1%/+7.0%
June +2.3%/+7.2%
July -0.2%/+1.9%
Average energy inflation in August for the last ten years has been +1.0%. If instead there is big decline in energy CPI when August data is reported next month, as there should be, that will put a serious dent in the inflation rate.