Consumer Prices Rise In August: What You Need To Know

After rising .5% in July, all consumer items tracked by the Bureau of Labor Statistics rose .3% in August. Over the year, all consumer items have risen 5.3%. 

What Happened: Over the last year, the biggest complaint — and concern — for consumers and some economists has been the rise in used car and truck prices and energy prices, as the former has increased 31.9% and the latter has increased 41.9%. 

The Concern: But those are the two most relevant sectors where prices have remained high. As such, reactions to the consumer price index (CPI) report remain mixed, as some — including the White House and Federal Reserve — believe the increasing prices and fear of inflation is transitory, and that, as the economy recovers, the pandemic eases and supply chains loosen, prices in specific industries will fall.

RSM Economist Joe Brusuelas is one of those people, believing the Fed is on the right track and doesn’t need to radically alter its monetary policies during this period of increased prices, adding that it is incomparable with what was experienced during the 1970s.

That’s because the increased prices are secluded to a few sectors, he said.  

“Perhaps more importantly, services, which comprise 61.4% of the index and is where the majority of economic interaction occurs, is up 0.1% on the month and a much more moderate 3% on a year ago basis,” he wrote in an email. 

For Brusuelas and Lindsey Bell, chief investment strategist for Ally Invest, the coronavirus delta variant is one of the bigger concerns looming over the economy, preventing prices from dropping sooner. But despite this concern, the report provided Bell with optimism. 

“Clearly, the market is pleased with the softer than expected CPI report,” Bell wrote in an email. “It showed the moderation that began in July continued into August.” 

Others believe inflation is rising much too fast and fear it will spin out of control. 

“The Labor Department reported this morning that consumer price index rose 5.3% in the past year—close to the highest it’s ever been in 13 years,” tweeted Meriwether Farms CEO Catharine O’Neill Tuesday. “Inflation is out of control, and the American people are suffering the cost.”

While it hasn’t taken root yet, the White House Council of Economic Advisors is concerned about inflation in the housing market, as home prices for renters and owners have risen by 18.6% over the last year. 

Where This Leaves Us: Despite the continued inflation debates, the Fed appears likely to stay the course, believing that inflation is temporary and not yet a cause for alarm. 

Photo: Bernard Hermant via Unsplash.