CPI tracks a slight increase in August: energy services, shelter, food, and medical care drove prices up
The BLS has reported a slight increase in prices in August, a surprise as many projected a overall decline in costs for consumers.
With many households struggling to keep up with inflation that is outpacing wage growth, August saw continued increases in prices across three critical sectors: natural gas (utility): +3.5 percent, shelter: +0.7 percent, food: +0.8 percent, and medical care: +0.8 percent.
Altogether, average prices across the market increased by 0.1 percent after seeing the CPI hold steady in July. Compared to August 2021, prices were up 8.3 percent. Last month’s increase pails compared to figures recorded early this year - for instance, prices increased by over a full percent in March and June.
The new report does highlight the possibility of an emerging trend of price growth slowing across the US. Aside from July, the 0.01 percent figure represents the lowest CPI increase this year.
The impact of the Inflation Reduction Act on the Consumer Price Index
With the Democrats having passed the Inflation Reduction Act earlier this summer and the mid-terms quickly approaching, many candidates are hoping to see prices come down... so far, this has not been the case. The bill is forward-looking and its more immediate impacts on inflation remain unclear.
The Federal Reserve’s move to increase interest rates has not begun to impact prices in the housing market, with the CPI tracking a 0.7 percent increase -- the largest all year. These figures come as many sellers report decreasing their asking price to meet buyers now facing a higher interest rate on their mortgage. Compared to August 2021, renters and homeowners are paying, on average, 6.2 percent this year, a staggering increase when considering that one’s housing costs are one of the largest they pay in a given month.
The Federal Reserve evaluates inflation in the market by looking at all prices minus those related to food and energy. When looking at this metric, prices rose 0.6 percent, leading to a 6.3 percent increase in consumer costs compared to this time last year. This is more than a point higher than the 5.2 percent projected by The Fed for price growth in 2022.