Inflation Cooled Slightly in August but Remains High
Washington, DC, September 14, 2021- The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.3% in August on a seasonally adjusted basis after rising 0.5% in July, the U.S. Bureau of Labor Statistics reported. Over the last 12 months, the all items index increased 5.3% before seasonal adjustment.
The indexes for gasoline, household furnishings and operations, food, and shelter all rose in August and contributed to the monthly all items seasonally adjusted increase. The energy index increased 2.0%, mainly due to a 2.8% increase in the gasoline index. The index for food rose 0.4%, with the indexes for food at home and food away from home both increasing 0.4%.
“Consumer prices cooled in August, but still rose 5.3% from a year before as supplies and labor continued to drive up prices,” reports the Wall Street Journal.
“The consumer price index measures what consumers pay for goods and services, including groceries, clothes, restaurant meals, recreation and vehicles.
“The August CPI report ‘might be a little bit of a headfake, honestly,’ said Laura Rosner-Warburton, senior economist at MacroPolicy Perspectives, suggesting that the recent inflation surge is proving to be transitory, as economists have predicted, ‘but other factors might be moving under the surface’ she said.
“‘There is a growing risk that higher inflation exacerbated by ongoing supply-chain frictions could put a dent in demand next year,’ Ms. Rosner-Warburton said.
“Inflation has heated up this year for several reasons. U.S. gross domestic product rose at a rapid 6.6% seasonally adjusted annual rate in the second quarter, fueled by a gush of consumer demand. Spending jumped at an 11.9% pace in the second quarter as more people received vaccinations, businesses reopened and trillions of dollars in federal aid coursed through the economy.
“Prices for services hit hardest by the Covid-19 pandemic are still recovering to pre-pandemic levels, including for air travel, accommodation, entertainment and recreation. The outbreak of the Delta variant of the Covid-19 virus likely weakened that rebound, taking some stress off overall price pressures in August, many economists say. At the same time, Delta-driven disruptions due to shutdowns and absenteeism could also worsen supply bottlenecks and shortages.
“Many companies are passing on higher labor and materials costs to consumers. The sharp uptick in restaurant prices in the past few months suggests that this pass-through is showing up in the inflation data, say economists.
“‘Peak pandemic pressures have likely passed, but significant pressures remain,’ said Aichi Amemiya, senior U.S. economist at Nomura Securities.”
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