Lettuce Discuss Inflation

**Mark Zandi** (0:13)
Welcome to Inside Economics. I'm Mark Zandi, the Chief Economist of Moody's Analytics, and I'm joined by my two trustee co-hosts, Marisa DiNatale, Chris Dorides. Hi, guys.

**Matt Colyar** (0:22)
Hi, Mark.

**Cris deRitis** (0:23)
Good morning.

**Mark Zandi** (0:24)
And we got our old regular favorite, Matt Colyar. Matt, thanks for joining us.

**Matt Colyar** (0:30)
Thanks for having me. Nice to see everybody.

**Mark Zandi** (0:32)
It is good to see everyone. We were getting to know each other pretty well. We had a podcast yesterday recorded with David Otter, the professor from MIT. I believe that podcast, it's on AI and the labor market, a really good podcast. That's going to be aired next Tuesday, and here we are on Friday the 14th.
I thought that was a great interview. What do you think, Chris? Really excellent.

**Matt Colyar** (1:01)
He's fantastic. Just so knowledgeable of the labor market, and clearly, he's getting a lot of thought to AI's impact.

**Mark Zandi** (1:09)
I thought it was cute. I don't know if cute is the right word, but he wanted to make a point that his PhD was not in economics. Did you notice that?
You wouldn't know. He's like the preeminent laborer and economist on the planet, right? Yes. I mean, but I think he got his PhD from Harvard in... Was it Harvard? I believe so. Harvard in public policy, which also comes shining through in the conversation. Yeah. It's a really great conversation. Oh, and just a point of interest, that's the first podcast in our AI series. We're going to have a number of different guests talking about different aspects of AI and the economy, and David was the first to participate. And we didn't ask Jenna what her Jenna score was, but I'm guessing it was pretty high. It was a pretty good conversation.
But here we are. It was a big week, a lot of data, mostly on inflation, although we got retail sales today as well. This is again, Friday, August 14th. And I thought we'd dive in with all the inflation statistics, because that's kind of top of mind, and talk a little bit about the market reaction and what the Fed's going to do with all this, and we'll play the game, and then we'll call it a podcast and go enjoy the weekend. So before I turn it over to Matt, Marisa, Chris, anything else you want to add? Let's get to it. Let's get to it. Okay, very good. Okay, Matt, where do you want to begin? CPI, PPI? Where do you want to go?

**Matt Colyar** (2:40)
Analogically, Tuesday we got CPI, Wednesday PPI. So let's move forward to today.

**Mark Zandi** (2:45)
Okay.

**Matt Colyar** (2:46)
So that sounded right. Sounds good to me. Yeah.

**Mark Zandi** (2:48)
Do you have the days right though? I don't think you have the days right.
Does he have the days right? Tuesday and Wednesday? It wasn't Wednesday and Thursday?

**Cris deRitis** (2:54)
No, Wednesday, Thursday. Wednesday, Thursday, you're right.

**Matt Colyar** (2:57)
I don't even have anything. I don't even have anything to blame it on.

**Mark Zandi** (2:59)
You're like AI, I got to correct it. I got to, you know, I got to watch you. I got to watch you.

**Matt Colyar** (3:05)
That's bad.

**Cris deRitis** (3:06)
That's a bad start. Yeah, it's been a blur.

**Matt Colyar** (3:08)
It's been a blur, so I will take every number I say here with a grain of salt.

**Cris deRitis** (3:11)
Okay.

**Mark Zandi** (3:11)
All right, all right. Well, actually, it raises my stature in the minds of the listener, I think.

**Cris deRitis** (3:17)
It's true. Yeah.
Because that was not possible.

**Mark Zandi** (3:21)
How is that possible?
Right, exactly. Okay, all right, let's take two. Okay, here we go.

**Cris deRitis** (3:30)
CPI. CPI.

**Matt Colyar** (3:31)
So, consumer price index report for July. First, any data point we get for July prices, we get a 0.1% increase from June to July. That was unexpected. I would kind of broadly characterize the whole report as relatively uneventful, at least at the surface. So, 0.1% increase in the consumer price index lowers the year over year rate from 3.5% to 3.4%.
Good frame of reference, in February, before energy prices started rising, we were at 2.4%, so still a healthy margin above where we were, but at least inching down in the right direction of late. Why is it inching down? Pretty expected to. Gas prices dropped slightly from June to July's level. So average gas prices, a little over $4 in June, a little under $4 in July leads to, is the primary driver behind a 1.5% decline in energy prices? And that's pretty soft reading.