Inflation continued to surge in August, but appeared to settle at nearly the fastest pace in almost 13 years as the economy continues to emerge from the pandemic, the feds said Tuesday.
The Labor Department’s Consumer Price Index, which measures a basket of goods and services as well as energy and food costs, jumped 5.3 percent in August from a year earlier.
That’s down from July’s 5.4 percent year-over-year rise in prices, which exactly matched June’s increase, the biggest 12-month rise since August 2008, just before the financial crisis sent the US into the worst recession it had seen since the Great Depression.
Consumer prices rose 0.3 percent from July, the Labor Department said.
Economists surveyed by Dow Jones expected a 5.4 percent year-over-year spike in August and monthly increase of 0.4 percent.
The core consumer price index, which excludes volatile food and energy costs, rose 4 percent from a year ago, lower than the 4.3 percent year-over-year jump that the index saw in July.
August’s month-over-month increase in the core CPI was the smallest jump since February.
That measure of inflation has eased since it spiked 4.5 percent in June, marking the fastest acceleration of prices it tracks since 1991.
Anthony Denier, CEO of trading platform Webull, said the surge in COVID-19 cases driven by the Delta variant could be hurting demand for goods and driving prices back down, like at the beginning of the pandemic.
“The more contagious Delta coronavirus variant, which has driven up cases globally, seems to be having a diminishing effect on inflation, while labor shortages and supply chain disruptions could push prices higher,” he said.
Much of the price increases this summer have been from sectors that were hit particularly hard by the pandemic and have since snapped back to high demand, such as used car prices, airfares and fuel costs.
Volatility in prices of those goods have been central to the Federal Reserve’s argument that the recent flare-up in inflation is temporary and not a reason to taper the government’s bond-buying program that’s been a boon to the stock market.
The latest round of data showed some signs that the Fed officials have been right, Ryan Detrick, chief market strategist for LPL Financial, said.
“After a crazy summer of nosebleed inflation readings, we may finally be starting to see signs of transitory inflation,” he said. “To be sure, a resurgent Delta variant played a part in dampening overall inflation, and future reports will help clarify the magnitude of its effect — but, expectations were already lowered to account for this dynamic and the data still missed.”
The index for airline fares fell sharply, decreasing 9.1 percent over the month. The index for used cars and trucks declined 1.5 percent in August, ending a series of five consecutive monthly increases, but those prices are still 31.9 percent higher than 12 months ago.
The cost of food continued to rise, but slowed somewhat compared with recent months, the feds said. The food index increased 0.4 percent in August from July, with the index for meats, poultry, fish, and eggs up 0.7 percent over the month and the beef index up 1.7 percent.
“The indexes for gasoline, household furnishings and operations, food, and shelter all rose in August,” the Bureau of Labor Statistics added in a press release.
Stock futures rallied on the data ahead of the market open as the new numbers suggest inflation may be easing and Fed officials may have been right about the price spikes being temporary.
But as Fed officials urge patience, corporate executives have been warning that they’re going to have to hike prices through the remainder of the year as they try to eke out a profit amid spiking shipping and labor costs.
Executives of major toymakers, retailers, grocery chains and consumer-goods conglomerates have all warned of surging prices.
And when it comes to meat, a sector that has driven price increases in American grocery stores, the Biden administration has blamed major processors, accusing them of “pandemic profiteering.”