In the Labor Department's August report, the cost of living climbed again, with gasoline pushing the monthly figures higher while the broader yearly picture held steady. Consumer prices rose four-tenths of a percent over July and remain 3.4 percent above a year earlier, but the more closely watched core measure, which sets aside food and energy, surprised forecasters by running hotter than expected. Such moments remind us that a single month's numbers are a fragment of a longer story, and that the question now is whether policymakers will read this fragment as a warning or as noise.
August Consumer Prices Rise 0.4%, Core Inflation Beats Forecasts and Raises Fed Hike Expectations
In the Labor Department's August report, the cost of living climbed again, with gasoline pushing the monthly figures higher while the broader yearly picture held steady. Consumer prices rose four-tenths of a percent over July and remain 3.4 percent above a year earlier, but the more closely watched core measure, which sets aside food and energy, surprised forecasters by running hotter than expected. Such moments remind us that a single month's numbers are a fragment of a longer story, and that the question now is whether policymakers will read this fragment as a warning or as noise.
The Labor Department's August consumer price report, released Friday, showed prices rising 0.4 percent from July, with gasoline leading the way. Compared with a year earlier, the overall index is up 3.4 percent, the same pace recorded in July. Gasoline climbed 3.9 percent for the month and now stands 27.4 percent above last year, accounting for more than a third of the monthly gain.
The headline matched economists' expectations, but core prices, which exclude food and energy, rose 0.3 percent against a forecast of 0.2 percent. The annual core rate eased to 2.4 percent from 2.5 percent, so the yearly trend cooled even as the monthly reading ran hotter than predicted. That monthly overshoot is what has investors expecting the Federal Reserve to raise rates at its meeting next week.
Across the economy, the picture was uneven. Shelter and core services each rose 0.3 percent, while grocery prices were flat. Electricity dropped for a second time in three months, and health care costs mostly slid, with medical services and non-prescription drugs both declining. Major appliances jumped 1.4 percent after two monthly falls, even as furniture fell 0.9 percent. The coming Fed meeting will show how policymakers interpret a report that is driven by energy at the top and firmer than expected underneath.
The Labor Department's August consumer price report, released Friday, showed prices rising 0.4 percent from July, with gasoline doing much of the work. Measured against a year earlier, the consumer price index is up 3.4 percent, the same annual rate recorded in July.
Gasoline is the largest single piece of the monthly gain. The gasoline index rose 3.9 percent in August and accounted for more than one-third of the overall increase. Compared with a year ago, gasoline is up 27.4 percent, by far the steepest annual move among the categories reported.
The headline number matched what economists had forecast: 0.4 percent for the month and 3.4 percent for the year. The surprise came in core prices, which leave out food and energy. Core rose 0.3 percent in August, against a forecast of 0.2 percent. The annual core rate came in at 2.4 percent, in line with expectations and down from 2.5 percent in July. So the yearly trend in core eased slightly even as the monthly reading ran hotter than predicted.
That monthly overshoot matters because of what comes next. The report is likely to convince investors that the Federal Reserve will raise interest rates when it meets next week.
Within core, goods and services moved differently. Core goods prices rose 0.1 percent for the month and are up 0.7 percent from a year ago. Core services, which exclude energy services, rose 0.3 percent and are up 3 percent over the year. Shelter followed the same pattern, rising 0.3 percent in August for a yearly gain of 3 percent.
Food was quiet. Grocery prices were flat for the month and are up 2.2 percent from a year ago, while dining out rose 0.3 percent and is up 3.4 percent. Electricity fell 0.2 percent in August, the second decline in three months. It had ticked up 0.1 percent in July and dropped 1 percent in June, and it remains 3.8 percent higher than a year ago. Apparel was flat after rising 0.1 percent in July and falling 0.6 percent in June; clothing is up 3.6 percent for the year.
Health care prices mostly slid. Medical care services fell 0.2 percent and are up 2.5 percent from a year ago, while medical care goods also fell 0.2 percent and are down 2.7 percent over the year. Prescription drug prices were flat after two monthly declines and are down 2.9 percent from last year. Non-prescription drugs fell 1 percent, a second straight monthly decline, and are down 2 percent for the year.
Household durables were uneven. Major appliance prices jumped 1.4 percent after falling the previous two months, though they are still 1.9 percent below a year ago. Furniture fell 0.9 percent after a flat July and is down 0.8 percent over the year. New cars and trucks rose 0.3 percent and are up 0.6 percent from a year ago. Used cars and trucks climbed 0.4 percent for the second month running but remain 2.3 percent below August of last year.
The Fed's meeting next week is the next test of how policymakers read a report with an energy-driven headline and a firmer-than-expected core.
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