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Falling gas prices 'might be a sign' of what’s next with inflation: Strategist

·2-min read

Gas prices are continuing to steadily decline after hitting a record high earlier this year, and one strategist is optimistic that it's a sign of things to come on the inflation front.

"You've got to start somewhere," iCapital Chief Investment Strategist Anastasia Amoroso said on Yahoo Finance Live (video above). "And energy is such an important input in a variety of intermediate and final goods. So I think the fact that we're starting to see energy prices come down, that might be a sign of what's more to come for other inflation indicators."

As of Aug. 17, the average national gas price is $3.94, according to AAA. Earlier this summer, it was more than $5.00 a gallon, indicating that inflation may be starting to show signs of cooling.

On top of that, the latest Producer Price Index (PPI) data — which tracks the prices of goods, services, and construction from the perspective of the seller — fell 0.5% in July, the first decline in more than two years. The downward move was largely attributed to falling energy prices.

July's Consumer Price Index (CPI) data, meanwhile, came in below expectations at 8.5% year over year, which was down from the prior month's 40-year high of 9.1%. These figures were also driven by energy prices as the gasoline index fell 7.7% in July — the largest month-over-month drop since April 2020 — and energy prices fell by 4.6%.

A person pumps gas into his car at a gas station in Miami on July 19, 2022, as U.S. gasoline prices have fallen from historic highs earlier in the summer. (Photo by CHANDAN KHANNA/AFP)
A person pumps gas into his car at a gas station in Miami on July 19, 2022, as U.S. gasoline prices have fallen from historic highs earlier in the summer. (Photo by CHANDAN KHANNA/AFP)

"We're starting to chip away at this inflation issue, and that's a big catalyst for the markets," Amoroso said. "This is what we've been waiting for really the last six months. So I take it as a big positive."

Amoroso said one of her main themes for the second half of the year is prudence, particularly "consumers being more prudent in how they spend their dollars" as inflation continues to slowly wane.

"It's not about revenge spending anymore," she said. "It's not about travel costs at all anymore. So I do suspect that we're going to see a slowdown in that spending."

Still, Amoroso added, "consumers may pull back, but overall consumers are not in bad shape."

Ethan is a writer for Yahoo Finance.

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