Surging electricity costs are a fresh source of inflationary pressure, Matt writes.

Driving the news: This week's Consumer Price Index report showed costs for electricity in the U.S. climbed at their fastest rate in 40 years.

• In August, average electricity prices were nearly 16% higher than they were in August 2021.

Why it matters: Like high gasoline prices, escalating electricity costs act as a tax on consumer spending, potentially slowing the economy.

• And on a more personal level, it’s a hardship for many families. Over 20 million U.S. households have fallen behind on their utility bills, as Bloomberg recently reported.
• Those delinquencies, and the end of pandemic-related moratoriums on utilities cutting service, sets the stage for a “tsunami of shutoffs,” one observer told Bloomberg.

The big picture: Surging American electricity costs are a distant but direct consequence of the Russian war on Ukraine, which created arguably the biggest shock to the global energy system since the oil crisis of the 1970s.

How it works: Prior to the war, Russia was the main supplier of Europe's imported energy in the form of oil, natural gas and coal.

• Since the invasion, sanctions and embargoes disrupted those supplies. (Russia just cut off all natural gas flows to Germany via its Nordstream 1 pipeline under the Baltic sea, for instance.)
• European prices for these products exploded higher as a result.
• Those high prices attracted imports from around the world — including from the U.S., via stateside export terminals that liquefy the gas for overseas shipping.
• To compete with high European prices, U.S. natural gas prices have risen too — though not as much. The U.S. benchmark for wholesale natural gas is up about 70% over the last 12 months, while the European benchmark has skyrocketed by roughly 240%.
• Since natural gas is the source of about 40% of U.S. electricity generation, those higher prices feed through to higher monthly bills.

Yes, but: America's system of regulated utilities, which forces some power providers to get regulators' clearance for price increases, means Americans are being spared the full impact of the gas price spike.

• It's cold comfort — but at least electricity bills aren't up 70%, as natural gas prices are.

What we're watching: How Washington policymakers respond to the inevitable rise in consumer complaints about soaring electricity bills.

• After all, the wave of consumer complaints that followed the upsurge in electricity prices in the 1970s generated a rash of new regulations.

📉 FedEx hit with downgrades after warning of revenue shortfalls. (MarketWatch)

🛑 Uber responds to breach after hacker gains wide access. (WSJ)

🛢 Germany seizes control of Rosneft oil refineries. (FT)

Import prices have started to tumble, thanks to the strong dollar, Matt writes.

Why it matters: The decline shows one channel through which the Fed's rate hikes — the key reason for the recent strength in the greenback — can tamp down inflation.

Driving the news: Fresh government data on Thursday showed import prices fell sharply for the second straight month in August.

• Prices for all imports fell 1% during the month.
• Much of that was because of lower prices for imported petroleum, which dropped more than 7% during the month.
• It's not just oil though. Prices for non-fuel imports have fallen for four straight months.

Between the lines: The drop in import prices is really just the flip side of the runaway strength of the U.S. dollar.

• One widely watched measure of the dollar, the ICE U.S. dollar index, is up roughly 14% in 2022, a massive move compared to the moderate ranges currencies typically trade in.

How it works: When currencies appreciate it means that money is able to buy more foreign goods than it used to, or buy the same amount at a lower price. Thus, in this case, import prices are lower in dollar terms.

The bottom line: The decline in import prices — which have become a larger factor in driving overall inflation since COVID hit — should at least be helpful on the margin to the Fed's effort to rein in inflation.

A larger share of homebuyers are paying cash and avoiding taking out mortgages, in what could be a longer-term structural change for the real estate market, Emily writes.

What's happening: Nearly a third of all homebuyers in July paid cash.

• That's down slightly from a peak earlier this year but still much higher than both pre-pandemic times and all of the 2021 buying frenzy, according to a Redfin analysis of county records across 41 of the biggest metro areas.

The big picture: There are a few reasons cash buyers make up a larger share of the market, Redfin deputy chief economist Taylor Marr tells Axios.

• Competition: The competitive housing market favors cash buyers who are more likely to win in a bidding war for a home over mortgage borrowers.
• Remote work arbitrage: In the remote work landscape, well-paid workers moved out of pricey areas to more affordable regions and they paid for homes with cash. This phenomenon has slowed but is still going on.
• Investors: There are more investors in the market now. And even as the homebuying market for individuals cools — with average 30-year mortgage rates now at more than 6% — investors continue to buy homes to rent out in a still-hot rental market. Three-quarters of investor purchases are made with cash, according to Redfin.

Meanwhile, more buyers are paying cash for second-home purchases because of moves the Biden administration has made to encourage more lending to first-time buyers. Lending to second homebuyers can often crowd out other borrowers.

• Back in April, housing regulators increased the fees on second-home loans fairly significantly with that aim in mind.
• The move pushed some vacation homebuyers to turn to cash or alternative financing, like tapping an existing home equity line of credit and using that cash to pay for another house.

If you think borrowing for your dream home is expensive now — check out this chart for a little perspective.

• You might have paid over 18% in 1981 … and even in the 1990s it never dipped below 6.49% — a low point achieved the week of Oct. 9, 1998. (Are there any readers out there who timed the 90s market perfectly and sealed a deal that week? Let us know!)