When the annual Consumer Price Index (CPI) rises, the media often portrays it as a signal of increasing inflation. However, looking at the 12-month average of the overall CPI measure provides a more comprehensive view.
In August, the CPI increased by 0.6%. From August 2022 to August 2023, it rose by 3.7%, surpassing the previous year’s reading of 3.2% for the 12 months ending in July 2023. Gas prices played a significant role in boosting the overall report, while other inflation categories showed smaller declines compared to previous months.
Gas Prices and Inflation
The primary driver of the August CPI was the price of gas, which increased by 10.6% from July to August. Oil markets are expected to face a significant supply shortage in the upcoming quarter due to further production cuts by Saudi Arabia.
Saudi Arabia’s production cut announcement was coordinated with Russia, which is currently engaged in a conflict with Ukraine and seeks an economic boost. Indicators of gas prices suggest that inflation in this category will worsen in September, but its impact on overall inflation may decrease as other prices fall.
Rent Decreases and CPI
Services inflation had a smaller impact on the August CPI. Airfare prices rose by 4.9% after several months of decline, and hospital service costs increased by 0.7% compared to the previous month. However, rent inflation has been cooling, with only a 0.3% increase in August, compared to 0.4% in July. Private indicators suggest that there is room for further improvement in the government’s measure of rent inflation.
Zillow’s August rent report indicated a decline in rent inflation levels in August, reaching levels below those in the fourth quarter of 2019, before the pandemic. The rent index from ApartmentList has also shown negative growth for the past two months on a yearly basis.
Easier Job for the Fed
With rent disinflation just beginning and the potential for further decreases in used car prices based on wholesale data, economists question whether bringing inflation back to the central bank’s 2% target will be as challenging as originally believed. As long as inflation rates are driven by specific categories and there is potential for cooling in other price categories, it is unlikely that US inflation will spike in the near
Denial of responsibility! Vigour Times is an automatic aggregator of Global media. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, and all materials to their authors. For any complaint, please reach us at – [email protected]. We will take necessary action within 24 hours.
