Economy: Gas price spike boosts inflation
August data, however, indicates costs other than fuel rising more slowly, easing pressure.
By Christopher Rugaber | The Associated Press
U.S. inflation jumped last month largely because of a spike in gas prices but other costs rose more slowly, suggesting price pressures are easing at a gradual pace.
The consumer price index rose 3.7% in August from a year ago, but a surge in gas prices accounted for more than half the increase. Above, shoppers look at blankets on sale in a Costco warehouse Aug. 24, in Sheridan, Colo. DAVID ZALUBOWSKI — THEASSOCIATED PRESS
In a set of conflicting data released Wednesday, the Labor Department said the consumer price index rose 3.7% in August from a year ago, up from a 3.2% annual pace in July. In Los Angeles and Orange counties, inflation ran at a 3.3% annual pace in August, the highest rate in four months but down from 7.6% a year earlier.
Yet excluding the volatile food and energy categories, so-called core prices in the U.S. rose4.3%, a step back from 4.7% in July and the smallest increase in nearly two years. That is still far from the Federal Reserve’s 2% target.
The big rise in gas prices accounted for more than half of the monthly inflation increase, the government said.
Despite the seemingly divergent figures, the decline in the core measure points to inflation coming under control, but at a much more gradual pace than earlier this year. The Federal Reserve closely tracks core prices because they are seen as a better indicator of future inflation trends.
The Fed is widely expected to skip an interest rate hike at its meeting next week. Wednesday’s figures keep the prospect of another rate increase later this year on the table, however, perhaps at its November or December meetings. The Fed raises borrowing costs in order to cool spending and hiring and bring down inflation.
Wednesday’s report suggested that after inflation faded quickly over the spring and the summer, future declines will be much more gradual.
Inflation dropped to 3% in June, down from a 9.1% peak in June 2022. Some of the forces that pulled down prices earlier this year — such as lower gas prices and improving supply chains, which reduced the cost of goods like furniture — have largely played out, economists say.
On a monthly basis, consumer prices jumped 0.6% in August, the biggest increase in more than a year.
Excluding food and energy, core prices increased just 0.3% in August from July, though that is up from 0.2% in the two previous months.
Energy costs rose 5.6% just in August, the biggest monthly increase since June 2022. Auto insurance prices also soared, rising 2.4% last month and 19.1% compared with a year ago. The sharp increase in new car prices in the past two years has also made them more expensive to insure and repair.
Airfares soared 4.9% in August from July, though after two months of sharp declines. At the same time, used car costs dropped 1.2%, the third straight decrease, while hotel prices fell3%, also the third consecutive fall.
Grocery prices moved up 0.2%, a trend that has strained many household’s finances. But food cost increases are cooling: They rose 3% compared with a year ago, down from double-digit increases last year.
Federal Reserve officials are becoming more open to the idea that inflation is coming under control, though chair Jerome Powell said last month it was still “too high.”