While prices are still close to a four-decade high due to rising expenses for things like food and rent, inflation in August declined for the second consecutive month.
In the previous year, the Consumer Price Index grew 8.3% as increasing costs for food, housing, and healthcare somewhat offset declining fuel prices. The most recent inflation statistics show that prices are still uncomfortably high, despite a tiny down from July’s 8.5% increase.
With volatile food and gasoline costs excluded, the core CPI increased by 6.3% from 5.9% in July.
Chris Zaccarelli, chief investment officer of the Independent Advisor Alliance, said in a note that “price levels continue to climb, they aren’t slowing down month-over-month (e.g., accelerating, not decelerating), and this inflation issue isn’t going away quietly.”
The story caused stock markets to decline, with the S&P 500 falling more than 3% in early trade. The Nasdaq fell 3.9%, while the Dow fell 2.7%.
According to a research released by Adobe earlier this week, the price of food, personal care products, and clothing increased unexpectedly online last month.
The August Consumer Price Index has a lot of unpleasant shocks, according to Mark Hamrick, senior economic analyst at Bankrate. “The costs for basics, such as housing, food, and medical care, continue to stoke this fire.”
The significant drop in petrol costs, he said, is remarkable, but it doesn’t solve the issue of inflation as a whole.
Consumers anticipate lower prices later this year, however. Consumers forecast no growth in house prices in 2023, according to a study released by the New York Fed on Monday.
This finding is in line with projections made by Goldman Sachs that home prices will plateau.
At the same time, when it meets later this month, the Federal Reserve is anticipated to keep raising its benchmark interest rate.
The federal funds rate has been increased four times by the central bank this year in an effort to slow the economy and stop soaring inflation.
At the Fed’s September meeting, economists anticipate a further increase of 0.75 percentage points.
Paul Ashworth, chief U.S. economist at Capital Economics, said in a note that “the Fed was already in a hawkish attitude and this data release would do little to discourage that.”
Despite this, “we still anticipate both headline and core inflation to decline more swiftly over the next 12 months than policymakers presently predict,” given that inflation expectations have almost returned to normal levels.