The August consumer price data were stronger than expected, but still rose at a slower pace than in recent months.
Headline CPI rose by 0.4% in August based on data released by the Labor Department Friday morning. Core prices were also up 0.4%. Both readings were above expectations but reflect a slowdown from the 0.6% gains in July.
Even with an uptick in August, the year/year rates for inflation remain significantly below their pre-COVID levels.
As a result, there is plenty of room for the remaining stimulus (and hopefully further stimulus) to push prices higher. The Federal Reserve said its focus has shifted toward the still-high level of unemployment, allowing inflation to bubble up as needed.
Energy prices rose by 0.9% in August, with gasoline prices up 2.0% as consumers decided that driving in their own vehicles was the safest option for travel. Unadjusted energy prices fell by 0.2%, with unadjusted gasoline prices flat compared with seasonal adjustment expectations for larger gains.
Food prices rose by 0.1% in the month, with food at home prices down 0.1% after a 1.1% decline in the previous month. Food prices away from home rose by 0.3%, continuing the upward trend.
Within the core, the relatively large owners’ equivalent rent category rose by 0.1%, while lodging away from home prices jumped by 0.9% and airline fares rose by 1.2%, suggesting that more people are traveling despite the uptick in COVID-19 cases.
Apparel prices rose by 0.6% after a 1.1% increase in the previous month, even as back-to-school sales continued into the month.
Prices of new vehicles were flat, but used vehicle prices surged by 5.4% after a 2.3% increase in July.
Overall CPI prices were up 1.3% from their year ago level, stronger than the 1.0% rate in July, but still below the pre-COVID rate of 1.5% in March. Prices excluding food and energy were up 1.7% year/year, slightly ahead of the 1.6% rate in July. The year/year rate was 2.1% in March before the shutdowns.