Numbers: The cost of US goods and services rose for the third consecutive month in August, but prices rose mostly from a rebound after an early fall in the coronovirus epidemic. Overall inflation is still quite low.
The consumer price index, a measure of cost of living, rose 0.4% last month, the government said on Friday. The largest increase in the cost of used cars and trucks in half a century accounted for more than 40% of the increase in the index.
Yet the price of most goods and services was reduced in the first three months by a decrease in demand or supply separately from certain items such as toilet paper or meat.
Inflation remains low even after three straight monthly increases in CPI. Consumer price growth increased from 1% to 1.3% in the last 12 months.
In contrast, the annual pace of inflation in early 2020 was much higher than 2.5%.
Another closely watched measure of inflation is that food and energy rose 0.4% in the last month. The annual increase in the so-called core rate increased from 1.6% to 1.7%.
What happened: The sharp increase in the cost of used cars and trucks was the biggest contributor to the rise in consumer prices last month. He jumped 5.4% to achieve the biggest gain in 51 years, an exaggerated increase that should soon fade. Vehicle prices have increased by less than 1% in the last one year.
Meanwhile, gasoline costs rose 2% over the summer in August, a major gain over the first summer. Gasoline is now a lot cheaper than a year ago, though.
Prices for home furnishings, entertainment, car insurance and airfare also increased last month, but most of these goods and services are priced lower than last year.
The cost of both rent and housing has increased slightly, but they are no longer rising rapidly due to record-low mortgage rates and high vacancies during the epidemic, not to mention a ban on eviction.
The cost of rent has increased by just 2.3% in the last 12 months, the smallest year-on-year increase since 2013.
In particular, grocery prices fell. They rose in the first few months of the epidemic as Americans stocked up, but prices have since closed.
Even after these recent increases, consumer prices have changed slightly since the prior year. Companies still do not have the ability to raise prices with the economy recovering from the first shutdown of the year and millions of Americans are still out of work.
See: MarketWatch Economic Calendar
big picture: Inflation is still well below the Federal Reserve’s 2% target and is not expected to be a problem for the economy until the epidemic recedes. The Fed plans to keep interest rates at least for the next year or two, a strategy that can be spent to push forward lower rates of inflation.
What are they saying “The very high growth reflects the neglect of earlier aggressive discounts during the epidemic,” said BMO Capital Markets senior economist Sal Guattieri. “Increased unemployment and rising automation should keep inflation low for some time.”
Market reaction: Dow Jones Industrial Average DJIA,
And the S&P 500 SPX,
Early Friday rose.