The Bureau of Labor Statistics reported that consumer prices rose 0.6 percent in August. This follows flat inflation for three of the past four months, as lower energy costs helped to ease inflationary concerns. As we saw with yesterday’s announcement on producer prices, August’s increase in pricing pressures was led by rebounding energy costs, particularly for gasoline, fuel oil, and natural gas. Overall energy prices were 5.6 percent higher last month for the consumer, with gasoline up 9 percent.
Food was another driver of growth at the producer level. This has not yet translated to higher consumer costs, with some notable exceptions (e.g., pork, eggs, whole milk, fresh fruit, and processed vegetables). Total food costs increased 0.2 percent, with food purchased at restaurants up 0.3 percent.
Core inflation, which excludes food and energy costs, increased 0.1 percent, the same as last month. On an annual basis, overall and core inflation were 1.7 percent and 1.9 percent, respectively. This suggests that inflation remains modest, and more specifically, it is under the 2 percent target stated from the Federal Reserve. With current inflation “in control,” this frees the Fed to do what it did yesterday by undertaking another round of quantitative easing to help stimulate the economy.
Chad Moutray is chief economist, National Association of Manufacturers.