WASHINGTON (AP) — This is great news for consumer and anyone concerned about inflation. Consumer prices slowed in August, rising by a slight 0.1%, reflecting a big drop in the cost of gasoline and other energy products. This is a measurement of all products some specific industries always vary.
The tiny increase in the consumer price index followed a much bigger 0.3% rise in July which had been driven by a jump in energy prices, the Labor Department reported Thursday. As energy always tends to rise in the summer months especially gas prices.
Inflation seems not to be the worry they thought in might be with the low fed rates. With energy costs falling in August for a third month out of the past four, the overall price increase slowed leaving consumer prices rising a small amount of 1.7% over the past year.
Core inflation, which excludes volatile food and energy costs, rose a just a little, 0.3% last month and 2.4% over the past year.
The Federal Reserve has been worried that inflation has been rising too slowly, citing this issue as one of the reasons it cut interest rates in July.
The central bank will meet again next week and investors are looking for another quarter-point rate cut as the central bank continues to battle various headwinds from a slowing global economy to the fallout from President Donald Trump’s trade war.
The Fed has also cited low inflation as a reason to be cutting rates at the moment with overall prices still falling below the Fed’s target for consumer prices to be rising annually by 2%. However, some economists, noting the bigger gains in core prices, have expressed concerns that inflation pressures could suddenly reappear given extremely low unemployment.
In a separate report, the government said that new applications for unemployment benefits, a proxy for layoffs, dropped by 15,000 last week to 204,000, the lowest level in nearly five months and further evidence that the labor market remains strong. The government reported last week that the unemployment rate stood at 3.7% in August, the third month it has been at this half-century low.
The inflation report showed that energy prices dropped 1.9% in August and now are 4.4% below the level of a year ago. Gasoline costs fell 3.5% last month after rising by 2.5% in July.
Food costs were unchanged for the third straight month and up a small 1.7% from a year ago. A 1.7% rise in a year is really low in terms of how the feds look at inflation. Especially with the rise in payroll and employment over the last year.
Clothing costs, which had posted a rather large jump in June, umped up an ever so slightly 0.2% in August. Clothing is something everyone needs. It is refreshing to the staples of our retail products not rising as much as predicted.
Among the items that showed increases in August were medical care and housing costs along with recreation, used car prices and airline fares. The cost of new vehicles and household furnishings fell.
Overall it seems inflation might not be the concern they once thought. This may show the fed that lowering the rates, as President Trump requested, might not be a bad idea. It may boost our economy even more and not raise consumer prices as much as feared. Many economists believe lower rates help everyone. It will most likely help home sales and the real estate market. Home sales in many areas of the country have been booming for and recovering from 2008 still. Some real estate markets like Denver, CO have seen double digit appreciation over the last few years due in part by the lower mortgage rates.