Consumer Prices Picked Up at Fastest Monthly Rate since January, Remain Modest Overall

The Bureau of Labor Statistics said that consumer prices rose by 0.4 percent in August, the fastest monthly rate since January. The uptick stemmed largely from higher energy costs, which increased by 2.8 percent in August, ending three months of declines, with gasoline prices up 6.3 percent. (It is important to note that this run-up in energy prices pre-dates Hurricanes Harvey or Irma and their effects on the market.) At the same time, food prices edged up 0.1 percent, mostly from food purchased away from home. Since August 2016, food and energy costs have increased 1.1 percent and 6.4 percent, respectively.

Overall, the consumer price index (CPI) increased 1.9 percent year-over-year in August, up from 1.7 percent in July. Pricing pressures had accelerated over much of the past year, increasing from 1.1 percent year-over-year in August 2016 to 2.8 percent year-over-year in February. However, inflation has cooled since then, even with the more-recent increases in energy costs noted above.

Similarly, core consumer prices, which exclude food and energy costs, increased by 0.2 percent in August, a six-month high. Excluding food and energy costs, consumer prices have risen 1.7 percent over the past 12 months, pulling back from its recent peak of 2.3 percent in January. As such, overall pricing pressures remain modest and mostly under control for now. The recent deceleration trend in pricing pressures should give the Federal Reserve some breathing room on monetary policy.

Chad Moutray

Chad Moutray

Chad Moutray is chief economist for the National Association of Manufacturers (NAM), where he serves as the NAM’s economic forecaster and spokesperson on economic issues. He frequently comments on current economic conditions for manufacturers through professional presentations and media interviews. He has appeared on Bloomberg, CNBC, C-SPAN, Fox Business and Fox News, among other news outlets.
Chad Moutray

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