Consumer prices cooled in August, easing inflation concerns
U.S. consumer prices rose lower-than-expected 0.3% last month, the smallest increase in seven months and a sign that inflation pressures may be cooling.
The August gain fell from a 0.5% increase in July and a 0.9% surge in June, the Labor Department reported Tuesday. It was the smallest increase since a similar 0.3% rise in January. The August slowdown in prices was seen as offering some hope that Americans were finally starting to see some relief from a price surge earlier in the year.
“Pandemic-related effects will diminish further over coming months,” Rubeela Farooqi, chief U.S. economist with High Frequency Economics, told investors in a report. “And it appears the impact of supply-chain disruptions and shortages is also fading, a positive development.”
Over the past 12 months, prices are up 5.3% a slight improvement after two months of gains of 5.4%, which had been the highest 12-month gains since 2008. Core prices, which exclude volatile food and energy costs, rose a tiny 0.1% in August and are up 4% over the past year.
A range of goods and services affected by the COVID-19 pandemic have seen their prices spike this year amid renewed economic growth, including new and used vehicles, hotel rooms, airline tickets, and building materials. In August, recreation costs rose 0.5%, while food and clothing each rose 0.4%, according to BMO economics.
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 pries will begin to return to more normal levels as numerous supply chain problems are resolved.
Although inflation pressures are easing, price increases are likely to persist amid strong consumer demand and ongoing global supply-chain bottlenecks, according to Kathy Bostjancic, chief U.S. financial economist at Oxford Economics.