US consumer prices rise 0.3 per cent in August, lowest in seven months
United States consumer prices rose a lower-than-expected 0.3 per cent last month, the smallest increase in seven months and a hopeful sign that a recent jump in inflation may be cooling.
The August gain was weaker than the 0.5 per cent increase in July and a 0.9 per cent surge in June, the Labor Department reported Tuesday. It was the smallest increase since prices rose 0.3 per cent in January.
While the upward march of prices appears to have eased last month, economists caution that the same underlying causes remain. Supply chains are still snarled especially for critical components like computer chips. Consumer demand is easily outpacing supply, which will push prices higher.
Over the past 12 months, prices are up 5.3 per cent, down slightly from two consecutive months averaging 5.4 per cent, the strongest 12-month price gains since 2008.
Core prices, which exclude volatile food and energy costs, rose a tiny 0.1 per cent in August and are up 4 per cent over the past year, an improvement from 12-month gains of 4.3 per cent in July and 4.5 per cent in June.
Republicans have attacked the Biden administration for this year’s surge in prices but administration officials have insisted that the price jump will be temporary and price gains will begin to return to more normal levels supply chains catch up to recovering economies.
For August, food prices rose 0.4 per cent, a slight moderation after gains of 0.8 per cent and 0.7 per cent in the previous two months.
Energy prices rose 2 per cent in August and are up 41.9 per cent over the past year, a surge that has been driven by rising gasoline prices, which were up 2.8 per cent in August and have jumped 42.7 per cent over the past year as the availability of vaccines has allowed Americans to resume travelling.
There is some evidence in Tuesday’s report suggesting that the surge in COVID-19 cases caused by the delta variant may have contributed to slowing price gains, particularly in areas such as travel. Airline fares fell 9.1 per cent in August while hotel room rates were down 2.9 per cent and rental car prices dropped 8.5 per cent.
Last week, the nation’s largest airlines warned that the spread of the delta variant would delay a return to normal operations. Air travel during the pandemic fell to levels not seen in the jet era.
Used-car prices, which had been surging because of low supplies, fell 1.5 per cent in August but new-car prices increased 1.2 per cent, reflecting the supply-chain problems still confronting automakers trying to get semiconductor deliveries.
The 0.3 per cent overall increase was below the consensus view that prices would rise 0.4 per cent in August. Analysts said the lower-than-expected reading should ensure that the US Federal Reserve leaves its ultralow interest rate policies unchanged at next week’s meeting. But the analysts said the report doesn’t alter the view that the Fed will announce plans to trim its monthly bond purchases later this year, probably at the Fed’s November meeting.
“Inflation readings remain high enough for the Fed to move away from emergency support, perhaps later this year, even with some moderation in the recovery in the labour market,” said Rubeela Farooqi, chief US economist at High Frequency Economics.