Inflation remains high even as drop in gas prices eases pain
Soaring consumer prices aren't fading as quickly as hoped.
Inflation in August remained near 40-year highs, defying forecasts of a sharper decline and squeezing the budgets of millions of Americans who are struggling to cover basic costs like food, gas and rent, a government report showed.
While inflation did ease, the drop from a year earlier wasn't as large as economists predicted. And two other key gauges – the month-over-month change in prices and a measure of inflation that excludes volatile food and energy costs – did just the opposite: They rose.
The disappointing results sent stock and bond prices tumbling, fueled worries that the
Overall prices increased 8.3% from a year earlier, down from an 8.5% rise in July and a 40-year high of 9.1% in June, as rising food and rent costs offset falling gasoline prices, according to the
Economists surveyed by Bloomberg had estimated yearly inflation would fall to 8%.
On a monthly basis, consumer prices edged up 0.1% after flatlining in July. Economists had forecast a similar-size decline.
Core prices, which exclude volatile food and energy items and generally provide a better measure of longer-term trends, increased a larger-than-expected 0.6% following a 0.3% rise the previous month. That bumped the annual increase from 5.9% to 6.3%, the sharpest gain in five months.
"Inflation has not gone down," says Woltjer, 63. "I don't care what the numbers say."
Stocks got clobbered after the report was released, as investors feared another big rate hike by the
"While consumers saw some welcome relief in energy prices in August, price pressures remained stubborn,"
The good news: Gas prices dropped sharply for a second straight month, tracing the decline in oil costs amid worries that a global recession will hammer consumer demand. Pump prices slid 10.6% from the previous month, but were still up 25.6% annually. Unleaded regular averaged
"I really find it helpful," she says. "I like being able to go out and see people."
Grocery prices, though, rose by 0.7% from July and are up 13.5% over the past 12 months. Prices for wheat and corn have eased in recent months, but remain volatile.
Barclays economist
In August, bread prices rose 2.2% from the previous month and 16.2% from a year earlier. Chicken costs increased by 0.5% and are up 16.6% yearly. And eggs jumped 2.9% and 39.8% from a year ago.
Some food costs eased. Bacon prices fell 0.5%. And fish prices declined 0.6%.
Gone from Woltjer's shopping cart are chips and other snacks, along with cereal and wine. She also has cut out impulsive Amazon purchases and monthly visits to Kohl's and DSW, the shoe warehouse. She recently decided to forgo a
"I think I'll have to wait," she says.
Other price trends were mixed. Rent leaped 0.7% monthly, and 6.7% over the past year, as landlords offset a surge in housing sale prices. Economist
Medical-care services increased 0.8% and 5.6% yearly. And new-vehicle costs advanced 0.8%, and 10.1% annually.
But airline fares fell 4.6% and have declined for three straight months. Used-car prices dipped 0.1%. And appliance prices dropped 1.2%.
Ashworth says the report solidifies Fed plans to raise its key short-term interest rate next week by three-quarters of a percentage point for a third straight month. It could even fuel talk of a percentage point hike, though he adds that's unlikely.
Economists do still expect inflation to slow in coming months, with consumers' inflation expectations, which affect actual price movements, nearly back to normal levels, Ashworth says.
Also, supply chain bottlenecks have eased and retailers' bloated inventories should spur price discounts, Sriram says.
At the same time, persistent worker shortages will likely maintain upward pressure on wages, Sriram says, likely prompting restaurants, hotels and other employers to continue to nudge prices higher.
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